Current Attempt in Progress Sheffield, Inc. is considering purchasing equipment costing $43000 with a 7-year useful life. The equipment will provide cost savings of $9500 and will be depreciated straight-line over its useful life with no salvage value. Sheffield Inc. requires a 8% rate of return. What is the approximate internal rate of return for this investment? Period 7 5.582 7% Present Value of an Annuity of 1 8% 9% 5.206 5.389 5.033 10% 4.868 13% 4.423

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.