Question

Required information {The following information applies to the questions displayed below.] Park Co. is considering an investment that requires immediate payment of $32,920 and provides expected cash inflows of $9,500 annually for four years. Park Co. requires a 5% return on its investments 1-a. What is the internal rate of return? (PV of $1, FV of $1. PVA of $1, and FVA of SD (Use appropriate foctor(s) from the tables provided. Round your present value factor to 4 decimals.) 1-b. Based on its internal rate of return, should Park Co. make the investment? O Yes O No

Answer 1

1 - a.	Internal rate of return	=	6%
1 - b.	Yes
	Workings:
		Year	Value Flows
		0	$      -32,920
		1	$          9,500
		2	$          9,500
		3	$          9,500
		4	$          9,500
	IRR	=	6.00%
	IRR	=	6%
	Required rate of return	=	5%
	Hence, IRR is more than Required rate of return, It is advisable to make the investment