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23 Jan 2018
The internal rate of return method is used by TestermanConstruction Co. in analyzing a capital expenditure proposal thatinvolves an investment of $69,264 and annual net cash flows of$13,000 for each of the nine years of its useful life.
Present Value of an Annuity of $1 atCompound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192
a. Determine a present value factor for anannuity of $1 which can be used in determining the internal rate ofreturn. If required, round your answer to three decimal places.
b. Using the factor determined in part (a) andthe present value of an annuity of $1 table above, determine theinternal rate of return for the proposal.
The internal rate of return method is used by TestermanConstruction Co. in analyzing a capital expenditure proposal thatinvolves an investment of $69,264 and annual net cash flows of$13,000 for each of the nine years of its useful life.
Present Value of an Annuity of $1 atCompound Interest | |||||
Year | 6% | 10% | 12% | 15% | 20% |
1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
5 | 4.212 | 3.791 | 3.605 | 3.352 | 2.991 |
6 | 4.917 | 4.355 | 4.111 | 3.784 | 3.326 |
7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
a. Determine a present value factor for anannuity of $1 which can be used in determining the internal rate ofreturn. If required, round your answer to three decimal places.
b. Using the factor determined in part (a) andthe present value of an annuity of $1 table above, determine theinternal rate of return for the proposal.
Deanna HettingerLv2
26 Jan 2018