**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 $113,550 and annual net cash flows of $30,000 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% ||------|------|------|------|------|------|| 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| 3.784| 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|**Tasks**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. [Input Box]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. [Input Box] (%)

At IRR Present value factor of annuity of $1 = Initial Investment/Net Cash Inflow…

The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $113,550 and annual net cash flows of $30,000 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% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 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. 3 4 5 6 7 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.

The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $113,550 and annual net cash flows of $30,000 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% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 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. 3 4 5 6 7 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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