# Financial Management: The Internal Rate of Return

Year........ Undiscounted free cash flows

0..............(380,000)

1...............20,000

2...............30,000

3...............200,000

4...............175,000

5...............130,000

6................145,000

Required rate of return = 15%

Question: The internal rate of return is closest to which of the following answers?

a. 20.50%

b. 18.20%

c. 16.45%

d. 14.25%

e. none of the above are within 1% of the correct answer. (Please provide the correct answer.)

https://brainmass.com/business/internal-rate-of-return/financial-management-the-internal-rate-of-return-19181

#### Solution Preview

The internal rate of return is used in capital budgeting, it's the interest rate that makes net present value of all cash flow ...

#### Solution Summary

This solution provides a brief discussion of the IRR concept and then goes into the specific calculation itself, indicating that it can be done both by hand and from using Excel. A Word document is attached which contains the IRR calculation portion of the response.