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The Smith Company is proposing to spend $3,195,400 on a project that has estimated net cash flows of $520,000 for each of the next 10 years. (NOTE: see the present value tables below.) Question 1: Using a rate of 6%, calculate the Net Present Value of the project. Question 2: Calculate the Internal Rate of Return for the project.

The Smith Company is proposing to spend $3,195,400 on a project that has estimated net cash flows of $520,000 for each of the next 10 years. (NOTE: see the present value tables below.) Question 1: Using a rate of 6%, calculate the Net Present Value of the project. Question 2: Calculate the Internal Rate of Return for the project.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The Smith Company is proposing to spend $3,195,400 on a project that has estimated net cash flows of $520,000 for each of the next 10 years.

(NOTE: see the present value tables below.)

Question 1: Using a rate of 6%, calculate the Net Present Value of the project.

Question 2: Calculate the Internal Rate of Return for the project. 

Year 1 2 3 4 5 67 00: 8 9 10 Year 1 2 3 4 5 6 7 8 9 10 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 Present Value of an Annuity of $1 at Compound Interest 15% 0.870 0.756 0.658 0.572 0.497 0.432 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.376 0.327 0.284 0.247 15% 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 F V A
Transcribed Image Text:Year 1 2 3 4 5 67 00: 8 9 10 Year 1 2 3 4 5 6 7 8 9 10 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 Present Value of an Annuity of $1 at Compound Interest 15% 0.870 0.756 0.658 0.572 0.497 0.432 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.376 0.327 0.284 0.247 15% 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 F V A
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