Internal Rate of Return MethodThe internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $49,890 and annualnet cash flows of $15,000 for each of the six years of its useful life.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.90921.73632.48743.170 3.0373,7913,6054.3554.8685.3355.7596.14550.9431.8332.6732.1063.4652.5894.2122.9914.9173.3265.5823.6056.2104.9683.837-6.8025.3284,0317.3605.6504.192a. Determine a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round your answer to three decemalplaces6.70.8931.6902.402159100.8701.6262.2832.8553.3523.7844.1600.8331.5284.4874.7725.019b. 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 proposal.

Time Value of Money :— According to this concept, Value of money in present day is greater than 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 $49,890 and annual net cash flows of $15,000 for each of the six years of its useful life. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.833 1.833 1.736 1.528 2.673 2.487 2.106 3.465 3.170 2.589 4.212 3,791 2.991 4.917 4.355 3.326 5.582 4.868 4.564 3.605 6.210 5.335 4.968 3.837 6.802 5.759 5.328 4,031 7.360 6.145 5.650 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 decemal places 1 2 3 4 5 6. 7 15 9 10 0.893 1.690 2.402 3.037 3,605 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 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 proposal.

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 $49,890 and annual net cash flows of $15,000 for each of the six years of its useful life. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.833 1.833 1.736 1.528 2.673 2.487 2.106 3.465 3.170 2.589 4.212 3,791 2.991 4.917 4.355 3.326 5.582 4.868 4.564 3.605 6.210 5.335 4.968 3.837 6.802 5.759 5.328 4,031 7.360 6.145 5.650 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 decemal places 1 2 3 4 5 6. 7 15 9 10 0.893 1.690 2.402 3.037 3,605 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 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 proposal.

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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