$12\%$

$155$ points

A company can purchase equipment for $$113,004$ that will yield a savings of $$20,000$ per year. The equipment has a useful life of $10$ years.

PV of ordinary annuity for $10$ years at the following rates are:

$10\%=6\mathrm{.}145$

$11\%=5\mathrm{.}889$

$12\%=5\mathrm{.}650$

$13\%=5\mathrm{.}462$

$14\%=5\mathrm{.}216$

$15\%=5\mathrm{.}019$

If the company has a cost of capital of $14\%$ should the project be accepted?

$$ Yes because the cost of capital is lower than the internal rate of return

No because the cost of capital is lower than the internal rate of return

Yes because the cost of capital is higher than the internal rate of return

$$ No because the cost of capital is higher than the internal rate of return