The internal rate of return method is used by Maxwell Construction Co. in analyzing a capital expenditure

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The internal rate of return method is used by Maxwell Construction Co. in analyzing a capital expenditure proposal that involves an investment of $45,420 and annual net cash flows of $12,000 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.


Exhibit 2:

Present Value of an Annuity of $1 at Compound Interest 6% Year 10% 12% 15% 20% 0.870 0.943 0.909 0.893 0.833 1.736 1.690 

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...
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Accounting

ISBN: 9780538475006

24th Edition

Authors: Carl S Warren, James M Reeve, Jonathan Duchac

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