A firm is considering a project requiring an investment of $900,000. The project would generate annual...
- A firm is considering a project requiring an investment of
$900,000. The project would generate annual cash flows of $244,250
for the next six years. The company uses the straight-line method
of depreciation. A partial table of the present value of an annuity
of $1 in arrears is as follows:
Year 3% 5% 7% 9% 10% 12% 14% 16% 6 5.41719 5.07569 4.76654 4.48592 4.35526 4.11141 3.88867 3.68474
Which of the following is the approximate internal rate of return for the project? (Note: Round the discount factor to five decimal places.)a. 12%.
b. 14%
c. 16%
d. 10%
Homework Answers
PVF at IRR = investment / annual Cash flows = 900,000/244250 =3.68474
Internal Rate of Return = 16%
at 16% for 6 year PVA = 3.68474
answer : =C) 16%
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