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Net Present Value Method and Internal Rate of Return Method for a service company Buckeye Healthcare Corp. is proposing to spa. Compute the net present value, using a rate of return of 12%. Use the table of present value of an annuity of $1 presented

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Answer #1

a. Present value of annual net cash flow = $27000*3.605 = $97335

Less amount to be invested = 102357

Net present value = $-5022

b. Less than 12%

c. Present value of annuity factor = Investment / annual cash inflow

= 102357/27000 = 3.791

Internal rate of return = 10%

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