A project requires an investment of $12,500 today and it will generate after-tax cash flows of $4,400 at the end of year 1, $5,500 at the end of year 2 and, $7,700 at the end of year 3. The company’s weighted average cost of capital is 11.8% per year. What is the project’s annual internal rate of return?
1) 16.3%
2) 15.8%
3) 16.7%
4) 17.5%
5) 17.4%
How would you reach this solution?