Homework Answers
Internal rate of return (IRR) for the Project
The Present Value factor for determining IRR = Initial Investment Cost / Net Annual Cash Inflow
= $48,457.36 / $10,000 per year
= 4.845736
From the Present Value Annuity Factor Table (PVAIF Table), the discount rate (IRR) corresponding to the factor of 4.845736 for 11 Years is closest to 16.95%.
“Hence, the Internal rate of return (IRR) for the Project will be 16.95%”
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