To calculate the internal rate of return (IRR), we need to set up the equation as follows:
0 = -£1,000 + £200/(1+IRR) + £200/(1+IRR)^2 + (£200+£700)/(1+IRR)^3
Using a financial calculator or a spreadsheet program, we can solve for IRR.
Calculating the IRR, we find that it is approximately 20%.
Therefore, the closest option is:
c) 20%
To calculate the internal rate of return (IRR), we need to set up the equation as follows:
0 = -£1,000 + £200/(1+IRR) + £200/(1+IRR)^2 + (£200+£700)/(1+IRR)^3
Using a financial calculator or a spreadsheet program, we can solve for IRR.
Calculating the IRR, we find that it is approximately 20%.
Therefore, the closest option is:
c) 20%