What is the IRR for a project that costs $100,000 and provides annual cash inflows of $30,000 for 6 years starting one year from today?

A) 19.91%

B) 16.67%

C) 15.84%

D) 22.09%

A) 19.91%

Explanation:

Net present value of cash flow at 19.91% can be calculated as follows

- 100000 + 30000/1.1991 + 30000 / (1.1991) ² + 30000 / (1.1991) ³ + 30000 / (1.1991) ⁴ + 30000 / (1.1991) ⁵ + 30000 / (1.1991) ⁶

= - 100000 + 25018 + 20864 + 17400 + 14511 + 12101 + 10092

= 0 (approx)

So the IRR for the project is 19.91 %.