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Figure 14-11. Present value of an Annuity of $1 in Arrears Periods 4% 6% 8% 10% 12% 14% 1 0.962 0.943 0.926 0.909 0.893 0.877

Figure 14-11.

Present value of an Annuity of $1 in Arrears

Periods

4%

6%

8%

10%

12%

14%

1

0.962

0.943

0.926

0.909

0.893

0.877

2

1.886

1.833

1.783

1.736

1.690

1.647

3

2.775

2.673

2.577

2.487

2.402

2.322

4

3.630

3.465

3.312

3.170

3.037

2.914

5

4.452

4.212

3.993

3.791

3.605

4.433

6

5.242

4.917

4.623

4.355

4.111

3.889

7

6.002

5.582

5.206

4.868

4.564

4.288

8

6.733

6.210

5.747

5.335

4.968

4.639

9

7.435

6.802

6.247

5.759

5.328

4.946

10

8.111

7.360

6.710

6.145

5.650

5.216

15. Refer to Figure 14-11. Cleves Company is considering two projects.

Project X

Project Y

Initial investment

$500,000

$100,000

Annual cash flows

$ 88,500

$ 34,320

Life of the project

10 years

4 years

Depreciation per year

$ 50,000

$ 25,000

Cleves requires a minimum rate of return of 8 percent.

A.

What is the internal rate of return for each project?

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