Question

A small business promise a return of $28 000 on an initial investment of $20 000 after 5 years.

What is the internal rate of return (IRR)

Answer 1

PV=FV/(1+r)ⁿ

PV is present value

FV is future value

r is the interest rate

n is the number of years

Pv=20000

Fv=28000

n=5

$20000=28000/(1+r)$ ⁵

$r=0.06961$

$0.06961*100$

$6.961$ %