eBookPrint ItemInternal Rate of Return Method for a Service CompanyThe Riverton Company, a Utah ski resort, recently announced a $543,116 expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated toproduce $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 InterestYear6%10%12%15%20%10.9430.9090.8930.8700.8331.8331.7361.6901.6261.5282.6732.4872.4022.2832.10643.4653.1703.0372.8552.5894.2123.7913.6053.3522.9916.4.9174.3554.1113.7843.3265.5824.8684.5644.1603.6056.2105.3354.9684.4873.83786.8025.7595.3284.7724.0319.5.6505.0194.192107.3606.145a. 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 finalanswer to the nearest whole percent.b. What are some uncertainties that could reduce the internal rate of return of this project?( PreviousNextCheck My Work 3 more Check My Work uses remaining.Save and ExitSubmit Assignment for GraEmail Instructor

Internal rate of return is the discount rate at which the present value of the future cash flow and…

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

Section: Chapter Questions

Problem 1PS

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Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $568,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $71,000. The company's minimum desired rate of return for net present value analysis is 10%. 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 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place.fill in…
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