Chapter 12, Problem 9Q

To determine

Introduction:

Investment Project

• Investment Projects refer to projects that require a lot of capital expenditure in the form of investments in assets. These projects aim at being profitable and earning the investor a minimum desired return of return.

• Investment Projects can be in shares of companies, plant and machinery that is manufactured or purchased, research and development projects that aim to create new marketable and sellable goods or services.

Internal Rate of Return

• Internal Rate of Return is the rate of return at which the net present value i.e. cash inflows less cash outflows would equal to zero.

• Internal Rate of Return is the minimum desired rate of return which an investment project should achieve. In the event that the investment project’s net present value is lesser than the Internal Rate of Return, the investment project will be rejected.

• Meaning of Investment project’s Internal Rate of Return.

• Method of computation of Internal Rate of Return.