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Determine the original investment for the following related subsequent cash flows if the internal rate of return (IRR) is 12%.



A :
$17,438.62

B :
$19,975.40

C :
$22,767.86

D :
$21,875.00

Respuesta :

Answer:

B : $19,975.40

Explanation:  

The computation of the original investment is shown below:

Year          Cash flows             Discount rate at 12%          Present value

1                 $10,000                  0.8926                              $8,928.57

2                $8,500                    0.79719                            $6,776.15

3                $6,000                    0.71178                             $4,270.68

Total present value                                                           $19,975.40

In the case of IRR, the total of present value would be equivalent to the orginal investment

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