Internal Rate of Return Method for a Service Company The Riverton Company, a Utah ski resort, recently announced a $543,116 expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $119,000 in equal annual cash flows for each of the first seven years of the project life. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 4.917 4.355 4.111 3.784 3.326 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 above. If required, round your a. Determine the expected internal rate of return of this project for seven years, using the present value of an annuity of $1 t answer to the nearest whole percent. % b. What are some uncertainties that could reduce the internal rate of return of this project?
Internal Rate of Return Method for a Service Company The Riverton Company, a Utah ski resort, recently announced a $543,116 expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $119,000 in equal annual cash flows for each of the first seven years of the project life. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 4.917 4.355 4.111 3.784 3.326 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 above. If required, round your a. Determine the expected internal rate of return of this project for seven years, using the present value of an annuity of $1 t answer to the nearest whole percent. % b. What are some uncertainties that could reduce the internal rate of return of this project?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Internal Rate of Return Method for a Service Company
The Riverton Company, a Utah ski resort, recently announced a $543,116 expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated to
produce $119.000 in equal annual cash flows for each of the first seven years of the project life.
Present Value of an Annuity of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
1.833
1.736
1.690
1.626
1.528
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
4.212
3.791
3.605
3.352
2.991
6.
4.917
4.355
4.111
3.784
3.326
5.582
4.868
4.564
4.160
3.605
6.210
5.335
4.968
4.487
3.837
8
6.802
5.759
5.328
4.772
4.031
9.
5.650
5.019
4.192
10
7.360
6.145
a. Determine the expected internal rate of return of this project for seven years, using the present value of an annuity of $1 table above. If required, round your final
answer to the nearest whole percent.
b. What are some uncertainties that could reduce the internal rate of return of this project?
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