Buckeye Healthcare Corp. is proposing to spend $186,725 on an eight-year project that has estimated net cash
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Buckeye Healthcare Corp. is proposing to spend $186,725 on an eight-year project that has estimated net cash flows of $35,000 for each of the eight years.
a. Compute the net present value, using a rate of return of 12%. Use the present value of an annuity of $1 table in the chapter (Exhibit 5).
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 present value of an annuity of $1 table presented in the text (Exhibit 5).
Exhibit 5:
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ISBN: 978-1285743615
26th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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