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This question relates to the Quiz 6.3 diagram, which shows the NPV profile for Projects X and Y.

What is the Internal Rate of Return of Project Y?

Question 2Select one:

a.
4%


b.
10%


c.
13%


d.
9%

The **Internal Rate of Return (IRR)** of a project is the discount rate at which the Net Present Value (NPV) equals zero. In the provided diagram, you can identify the IRR by locating the point where the NPV curve for Project Y (green curve) intersects the horizontal axis, where the NPV is 0.

From the diagram, it seems that the green curve for Project Y intersects the Cost of Capital axis (where NPV = 0) at around **13%**. Therefore, the IRR for Project Y is **13%**.

Thus, the correct answer is:

**c. 13%**

Would you like further details or explanations on how to interpret IRR or related concepts?

Here are some related questions for further exploration:
1. How is the IRR of a project typically used in financial decision-making?
2. What are the differences between IRR and NPV for evaluating projects?
3. How do you calculate the NPV at different discount rates?
4. Why might a company prefer a project with a higher IRR?
5. What does it mean if a project has multiple IRRs?

**Tip:** The IRR is useful for comparing projects but may not always be the best indicator in the presence of non-conventional cash flows. In such cases, the NPV method is usually more reliable.

This question relates to the Quiz 6.3 diagram, which shows the NPV profile for Projects X and Y. What is the Internal Rate of Return of Project Y? Select one: a. 4% b. 10% c. 13% d. 9%

Determine the Internal Rate of Return (IRR) for Project Y using the NPV profile. The problem shows how to interpret the diagram where the NPV for Project Y crosses the axis at approximately 13%, making IRR for Project Y equal to 13%. Ideal for students studying financial decision-making concepts.

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