NPV and IRR: Equal Annual Net Cash Inflows (LO2)

Snow Devil Company is evaluating a capital expenditure proposal that requires an initial investment of

$32,312, has predicted cash inflows of $8,000 per year for seven years, and has no salvage value.

Required

a. Using a discount rate of 12 percent, determine the net present value of the investment proposal.

b. Determine the proposal’s internal rate of return. (Refer to Appendix 12B if you use the table approach.)

c. What discount rate would produce a net present value of zero? LO.1