Question: The internal rate of return method is used by Merit Construction Co. in analyzing a capital expenditure proposal that involves an investment of $ 82,220

The internal rate of return method is used by Merit Construction Co. in analyzing a capital expenditure proposal that involves an investment of $ 82,220 and annual net cash flows of $ 20,000 for each of the six years of its useful life.

a. Determine a present value factor for an annuity of $ 1, which can be used in determining the internal rate of return.

b. Using the factor determined in part (a) and the present value of an annuity of $ 1 table appearing in this chapter (Exhibit 2), determine the internal rate of return for the proposal.

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