Question

As the capital budgeting director for Chapel Hill Coffins Inc., you are evaluating construction of a new plant. The plant has a net cost of $5 million in Year 0 (today), and it will provide net cash inflows of $1 million at the end of Year 1, $1.5 million at the end of Year 2, and $2 million at the end of Years 3 through 5. Within what range is the plant's IRR

Answer 1

Answer:

18.37%

Explanation:

The internal rate of return is the return at which the net present value comes to zero

Here the net present value is the value at which the present cash inflows after discounting factor is exceeded then the initial investment. If this thing happens then the project would be accepted otherwise it would be rejected

The computation of the range of the plant IRR is to be shown in the attachment below.

Please find the attachmentHence, the internal rate of return is 18.37%