investing in an irrigation project for two 1). The benefits over t periods, peri

Question

investing in an irrigation project for two 1). The benefits over t periods, period zero (t 0) and period one (t would be $100 in period zero and $700 in period one. The costs would be $500 in period zero and $100r in the period one, where r is the rate of interest used in discounting Bt-Ct Suppose that the NPV is calculated as follows: NPV = .oart What is the internal rate of return for this project? a. 0.2 b. 0.4 c. 0.6 d. 0.8 14. Minifundio can provide employment for a. 3 workers b. 4 workers C.6 workers d. None of the above

Explanation / Answer

13)

IRR = r

PV of benefits = PV of costs

100 + 700/(1 + r) = 500 + 100r/(1 + r)

700 - 100 r = 400 x (1 + r)

r = 0.6 (Option c )

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