Buckeye Healthcare Corp. is proposing to spend $96,030 on an eight-year project that has estimated net cash

Question:

Buckeye Healthcare Corp. is proposing to spend $96,030 on an eight-year project that has estimated net cash flows of $18,000 for each of the eight years.

a. Compute the net present value, using a rate of return of 12%. Use the table of present values of an annuity of $1 in the chapter.

b. Based on the analysis prepared in part (a), is the rate of return

(1) More than 12%,

(2) 12%, or

(3) Less than 12%? Explain.

c. Determine the internal rate of return by computing a present value factor for an annuity of $1 and using the table of the present value of an annuity of $1 presented in the text.

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