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Question
A company is considering a five-year project. It plans to invest $80,000 now and it forecasts cash inflows for each year of $22,857. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine whether it should accept this project. Selected factors for a present value of an annuity of 1 for five years are shown below:
|
Interest Rate |
Present Value of an Annuity of 1 factor |
|
10% |
3.7908 |
|
12% |
3.6048 |
|
14% |
3.4331 |
Answer
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Related questions
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Q:
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A. Total cost times markup percentage.
B. Total cost per unit times markup percentage per unit.
C. Total cost per unit divided by markup percentage per unit.
D. Markup percentage per unit divided by total cost per unit.
E. Markup percentage divided by total cost.
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B. Perfect predictions of future outcomes.
C. Results from past outcomes only.
D. Results from current outcomes only.
E. Speculation of interest rates and economic performance only.
Q:
If net present values are used to evaluate two investments that have equal costs and equal total cash flows, the one with more cash flows in the early years has the higher net present value.