Buckeye Healthcare Corp. is proposing to spend $109,296 on an eight-year project that has estimated net cash flows of $22,000 for each of the eight years.
a. Compute the net present value, using a rate of return of 15%. Use the table of present values of an annuity of $1 in the chapter.
b. Based on the analysis prepared in part (a), is the rate of return (1) more than 15%, (2) 15%, or (3) less than 15%? Explain.
c. Determine the internal rate of return by computing a present value factor for an annuity of $1 and using the table of the present value of an annuity of $1 presented in the text.