The Riverton Company, announced a $949,312 million expansion of lodging properties, ski lifts, and terrain in Park City, Utah. Assume that this investment is estimated to produce $208,000 million 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 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 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. b. Identify the uncertainties that could reduce the internal rate of return of this project?
The Riverton Company, announced a $949,312 million expansion of lodging properties, ski lifts, and terrain in Park City, Utah. Assume that this investment is estimated to produce $208,000 million 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 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 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. b. Identify the 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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The Riverton Company, announced a $949,312 million expansion of lodging properties, ski lifts, and terrain in Park City, Utah. Assume that this investment is estimated to produce $208,000 million in equal annual cash flows for each of the first seven years of the project life.
| 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 |
a. Determine the expected
b. Identify the uncertainties that could reduce the internal rate of return of this project?
Transcribed Image Text:Internal Rate of Return Method for a Service Company
The Riverton Company, announced a $949,312 million expansion of lodging properties, ski lifts, and terrain in Park City, Utah. Assume that this investment is estimated to produce
$208,000 million 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
1
2
3
4
5
6
7
8
9
10
1.833
2.673
3.465
4.212
4.917
5.582
6.210
6.802
7.360
0.909
1.736
2.487
3.170
3.791
4.355
4.868
5.335
5.759
6.145
0.893
1.690
2.402
3.037
3.605
4.111
4.564
4.968
5.328
5.650
0.870
1.626
2.283
2.855
3.353
3.785
4.160
4.487
4.772
5.019
0.833
1.528
2.106
2.589
2.991
3.326
3.605
3.837
4.031
4.192
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.
%
b. Identify the uncertainties that could reduce the internal rate of return of this project?
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