Internal Rate of Return MethodThe internal rate of return method is used by King Bros. Construction Co. in analyzing a capital expenditure proposal that involves aninvestment of $48,592 and annual net cash flows of $16,000 for each of the four years of its useful life.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.52832.6732.4872.4022.2832.1063.46543.1703.0372.8552.58954.2123.7913.6053.3522.9914.9174.35564.1113.7843.3264.16075.5824.8684.5643.60586.2105.3354.9684.4873.8375.7596.8025.3284.7724.0316.145107,3605.6505.0194.192a. Determine a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round youranswer to three decimal places.b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for theproposal.%

Hence, 3.037 is the PV of an annuity of $1. It is obtained by the division of initial investment and…

Answered: Internal Rate of Return Method The…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Payback Period and Accounting Rate of Return: Equal Annual Operating Cash Flows with Disinvestment Minn is considering an investment proposal with the following cash flows: Initial investment-depreciable assets $227,500 Net cash inflows from operations (per year for 10 years) 32,500 Disinvestment-depreciable assets 22,750 For parts b. and c., round answers to three decimal places, if applicable. a. Determine the payback period. 7 years b. Determine the accounting rate of return on initial investment. 5.495 c. Determine the accounting rate of return on average investment. 4.902
Internal Rate of Return A project is estimated to cost $244,296 and provide annual net cash flows of $58,000 for five years. 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 Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above.fill in the blank 1 %
Internal Rate of Return A project is estimated to cost $350,265 and provide annual net cash flows of $57,000 for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 1 0.909 0.893 0.870 0.833 1.833 1.690 1.528 1.736 1.626 2.673 3 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 3.352 2.991 4.355 4.111 3.784 3.326 6 4.917 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 Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above. %
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Internal Rate of Return Method The internal rate of return method is used by King Bros. Construction Co. in analyzing a capital expenditure proposal that involves an investment of $89,424 and annual net cash flows of $18,000 for each of the eight years of its useful 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 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 4.212 3.791 3.605 3.352 2.991 6. 4.917 4.355 4.111 3.784 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 a. Determine a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round your answer to three decimal places. b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the…
Internal Rate of Return Method The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $80,028 and annual net cash flows of $19,000 for each of the five years of its useful 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 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 3.352 2.991 6 4.917 4.355 4.111 3.784 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 a. Determine a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round your answer to three decimal places.fill in the blank 1 b. Using the factor determined in part (a) and the present value of an annuity of $1 table above,…
Internal Rate of Return Method for a Service Company The Riverton Company, announced a $645,535 million expansion of lodging properties, ski lifts, and terrain in Park City, Utah. Assume that this investment is estim produce $121,000 million in equal annual cash flows for each of the first eight 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 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 3.353 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 a. Determine the expected internal rate of return of this project for eight years, using the present value of an annuity of $1 table above. % b. Identify the uncertainties that could reduce the internal rate of return of this project? 1.
Internal Rate of Return Method The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $83,200 and annual net cash flows of $20,000 for each of the seven years of its useful 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 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 3.352 2.991 6 4.917 4.355 4.111 3.784 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 a. Determine a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round your answer to three decimal places.fill in the blank 1 b. Using the factor determined in part (a) and the present value of an annuity of $1 table above,…
4a
7 Present work in Excel Consider the following: Financed amount: $385,000 Cost of funds: 7.25% (interest rate) 30-year amortization Calculate (round to nearest dollar): Annual payment amount (this is monthly payment x 12 --- then rounded to nearest dollar) Amount of 'Interest paid' during year 3 (rounded to nearest dollar) Amount of 'Principal paid' during year 3 (rounded to nearest dollar)
Information on four investment proposals is given below: 6 years A B Investment required Present value of cash inflows Net present value $ (300,000) 424,800 $ 124,800 $ (140,000) 191,700 $ 51,700 Investment Proposal C $ (100,000) 151,100 $ 51,100 Life of the project 5 years 7 years Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. Investment Profitability Proposal Index Rank Preference ABCD D $ (1,500,000) 2,001,700 $ 501,700 6 years

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