Use the following table: Present Value of an Annuity of 1 Period 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $111,915 and is expected to generate cash inflows of $45,000 each year for three years. The approximate internal rate of return on this project is a)8% B)9% C)10% D)less than the required 8%.

Use the following table: Present Value of an Annuity of 1 Period 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $111,915 and is expected to generate cash inflows of $45,000 each year for three years. The approximate internal rate of return on this project is a)8% B)9% C)10% D)less than the required 8%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 27P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Use the following table:

Present Value of an Annuity of 1

Period 8% 9% 10%

1 .926 .917 .909

2 1.783 1.759 1.736

3 2.577 2.531 2.487

A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $111,915 and is expected to generate cash inflows of $45,000 each year for three years. The approximate internal rate of return on this project is

a)8%

B)9%

C)10%

D)less than the required 8%.

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