A Firm Is Trying to Determine If It Should Launch

Multiple Choice

A firm is trying to determine if it should launch a product. The product has an expected life of three years. It will bring in cash flows of $5,000 in the first year, $4,000 in the second year, and $3,000 in the third year. The company estimates that it will invest $9,500 in product research and development costs. What is the estimated IRR for this product? Choose the IRR value that is closest to the amount invested.

A) 7%
B) 14%
C) 21%
D) 28%