Internal rate of return method The internal rate of return method is used by Royston Construction...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Internal rate of return method The internal rate of return method is used by Royston Construction Co. in analyzing a capital expenditure proposal that involves an investment of $34,650 and annual net cash flows of $10,000 for each of the 4 years of its useful 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 a present value factor for an annuity of $1, which can be used in determining the internal rate of return. If required, round your answer to three decimal places. b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal. % Internal rate of return method The internal rate of return method is used by Royston Construction Co. in analyzing a capital expenditure proposal that involves an investment of $34,650 and annual net cash flows of $10,000 for each of the 4 years of its useful 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 a present value factor for an annuity of $1, which can be used in determining the internal rate of return. If required, round your answer to three decimal places. b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal. %
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Estimate the errors involved in Exercise 63, parts (a) and (b). How large should be in each case to guarantee an error of less than 0.00001?
-
Enter the following column headings across the top of a sheet of paper: Enter the transaction letter in the first column and show the effect (if any) of each of the following transactions on each...
-
Refer to the data given in Problem 16.16 on page 682 (and stored in SolarPower) that represent the yearly amount of solar power installed (in megawatts) in the United States from 2000 through 2008....
-
The following cash flow information was taken from the 2015 annual report for Johnson & Johnson. Compute the missing values in the table (amounts are in millions). Based on this data, how does the...
-
Identify the order in which the following budgets are prepared. Use the letter to indicate the first budget to be prepared, b for the second, and so on. 1. Production budget 2. Direct labor budget...
-
Problem 13-20 (Algo) Sell or Process Further Decision [LO13-7] (Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat Packers is a major processor of beef and other meat...
-
Mark invested $5,000 this morning with City Bank at 1.2 percent interest, compounded annually. This afternoon, he discovered that he could have invested his more y Country Bank and earned 4.8 percent...
-
KK Ltd. runs a departmental store which grants 10 focuses for each acquisition of ' 500 which can be limited by the clients for additional shopping with a similar dealer. Unutilised focuses will pass...
-
In addition to accounting for profit/loss, what are 3 other contributions to wealth in positive and negative ways identifiedin Balance sheet and Income statement?
-
Customers are perceiving standards for their various purchases and knowledge about the products are nowadays increasing a lot. With respect to the statement as discussed above relate the followings...
-
IMBA Products Company produces Banana fruit drink. The units and equivalent (in liters), as well as unit costs, for the Mix Department are as follows: Materials Conversion Equivalent units in...
-
Question 3. The furniture division of Playfurn Ltd, a profitable, diversified company, purchased a machine 5 years ago for $75 000. When it was purchased the machine had an expected useful life of 15...
-
Jim and Tammy Faye Bakker founded the PTL (Praise the Lord) club, a religious broadcasting organization, in 2015. A little more than one decade later, the PTL Club claimed more than 500,000 members...
-
Sue Deliveau opened a software consulting firm that immediately paid $2,000 for a computer. Was this event a transaction for the business?
-
What are progressive and regressive taxes?
-
What is a flat tax?
-
What is the ability-to-pay principle?
Study smarter with the SolutionInn App