Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $90,000. The annual cash inflows for the next three years will be: Year 1 2 3 Cash Flow $40,000 38,000 30,000 Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the financial calculator method. a. Determine the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Internal rate of return b. With a cost of capital of 12 percent, should the equipment be purchased? No O Yes Appendix B Present value of $1, PVF PV = FV 1 (1 + i)" Percent Period 1% 3% 4% 5% 6% 8% 9% 11% 12% 1 0.943 0.893 0.990 0.980 0.971 0.943 0.926 0.857 7% 0.935 0.873 0.816 2 0.962 0.925 0.889 0.855 0.890 0.952 0.907 0.864 0.823 0.917 0.842 0.772 0.708 10% 0.909 0.826 0.751 0.683 0.901 0.812 0.731 0.797 0.712 3 0.840 0.915 0.888 0.794 0.735 4 0.792 0.763 0.659 0.636 0.971 0.961 0.951 0.942 5 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.863 0.784 0.747 0.621 0.593 0.567 0.681 0.630 6 0.507 0.705 0.665 0.535 0.482 7 0.583 0.452 8 0.627 0.540 0.434 0.404 0.933 0.923 0.914 0.905 0.837 0.813 0.789 0.766 0.744 0.722 9 0.500 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 10 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.592 0.558 0.527 0.463 0.429 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.361 0.322 0.287 11 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.896 0.804 0.391 0.352 0.317 0.286 0.258 0.232 12 0.788 0.397 0.257 13 0.368 0.340 0.773 0.758 0.743 0.229 0.205 14 0.887 0.879 0.870 0.861 0.853 0.844 15 0.555 0.362 0.315 0.239 0.209 0.183 0.163 16 0.728 0.458 0.339 0.188 17 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.478 0.412 0.170 0.146 0.714 0.700 0.686 0.436 0.416 0.292 0.270 0.250 0.317 0.296 18 0.836 0.497 0.469 0.442 0.417 0.394 0.371 0.350 0.331 0.312 0.233 0.174 0.097 0.054 0.212 0.153 0.534 0.513 0.494 0.475 0.456 0.375 0.130 19 0.828 0.396 0.116 0.232 0.215 0.218 0.198 0.180 0.164 0.149 0.092 0.057 20 0.277 0.258 0.184 0.820 0.780 0.104 0.673 0.610 0.194 0.178 0.116 0.075 0.377 0.295 0.231 0.138 0.124 0.074 0.044 25 0.146 0.059 30 0.742 0.552 0.131 0.099 0.308 0.208 40 0.672 0.453 0.307 0.142 0.067 0.046 0.032 0.022 0.015 0.005 0.033 0.011 0.003 50 0.608 0.372 0.228 0.141 0.087 0.034 0.021 0.013 0.009 Appendix B (concluded) Present value of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.862 0.840 0.833 0.800 0.741 0.714 0.667 0.847 0.718 2 0.783 0.743 0.694 0.640 0.769 0.675 0.444 0.855 0.731 0.624 0.534 0.870 0.756 0.658 0.572 0.497 0.769 0.592 0.455 0.706 0.593 3 0.579 0.512 0.693 0.613 0.543 0.641 0.552 0.609 0.515 0.549 0.406 0.301 0.510 0.364 0.260 0.296 0.198 4 0.592 0.499 0.482 0.350 0.269 5 0.519 0.476 0.456 0.419 0.402 0.223 0.186 0.410 0.328 0.262 0.210 6 0.480 0.425 0.456 0.400 0.432 0.376 0.327 0.437 0.370 0.314 0.266 0.410 0.354 0.305 0.390 0.333 0.352 0.296 0.335 0.279 0.233 0.207 0.159 7 0.165 0.122 0.132 0.088 0.059 0.133 0.095 0.068 8 0.376 0.351 0.285 0.249 0.168 0.123 .091 0.039 9 0.333 0.209 0.308 0.270 0.284 0.247 0.263 0.227 0.243 0.208 0.225 0.191 0.134 0.107 0.094 0.073 0.067 .050 .048 0.035 0.026 0.017 10 0.295 0.176 0.194 0.162 0.135 0.1 12 11 0.012 0.261 0.231 0.237 0.208 0.215 0.187 0.163 0.195 0.168 0.162 0.137 0.148 . 124 .086 0.069 0.056 0.043 0.037 0.027 0.025 0.018 12 0.008 0.178 . 152 0.130 0.111 13 0.204 0.182 0.145 0.1 16 0.093 0.055 0.033 .020 0.005 0.104 .088 14 0.160 0.141 0.125 0.099 0.078 0.044 0.025 0.003 0.181 0.160 15 0.108 0.065 0.020 0.002 0.140 0.123 0.108 0.095 .081 16 0.123 0.107 0.093 0.141 0.015 0.011 0.008 .084 .071 0.060 .093 0.054 0.035 0.028 0.023 0.002 0.015 0.012 .013 0.009 .006 0.005 .003 0.002 0.002 0.001 17 0.074 .062 .052 0.044 .037 0.125 0.080 0.045 0.006 0.069 0.059 .001 18 0.095 0.081 0.069 .051 0.038 0.018 .001 0.009 0.007 19 0.083 0.060 0.051 0.043 .031 0.014 0.111 0.098 .087 0.047 0.026 0.008 0.005 .003 .002 0.001 20 25 30 0.073 0.038 0.020 0.005 0.070 0.061 0.030 0.015 0.004 0.001 0.051 .024 0.012 0.003 .043 0.020 0.009 0.002 0.037 .016 0.007 0.001 .031 .013 0.005 0.001 0.026 0.010 0.004 .012 0.004 0.001 0.005 0.001 40 0.001 50 0.002 0.001 0.001 Appendix D Present value of an annuity of $1,PVA PVA-A Period 1 2. 3 5 6 7 8 10 11 12 13 14 15 16 17 18 1% 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 10.368 11.255 12.134 13.004 13.865 14.718 15.562 16.398 17.226 18.046 22.023 25.808 32.835 39.196 2% 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 12.849 13.578 14.292 14.992 15.678 16.351 19.523 22.396 27.355 31.424 3% 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 13.166 13.754 14.324 14.877 17.413 19.600 23.115 25.730 4% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 11.652 12.166 12.659 13.134 13.590 15.622 17.292 19.793 21.482 5% 0.952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 10.380 10.838 11.274 11.690 12.085 12.462 14.094 15.372 17.159 18.256 Percent 6% 7% 0.943 0.935 1.833 1.808 2.673 2.624 3.465 3.387 4.212 4.100 4.917 4.767 5.582 5.389 6.210 5.971 6.802 6.515 7.360 7.024 7.887 7.499 8.384 7.943 8.853 8.358 9.295 8.745 9.712 9.108 10.106 9.447 10.477 9.763 10.828 10.059 11.158 10.336 11.470 10.594 12.783 11.654 13.765 12.409 15.046 13.332 15.762 13.801 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 8.851 9.122 9.372 9.604 9.818 10.675 11.258 11.925 12.233 9% 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 8.313 8.544 8.756 8.950 9.129 9.823 10.274 10.757 10.962 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 9.077 9.427 9.779 9.915 11% 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 6.207 6.492 6.750 6.982 7.191 7.379 7.549 7.702 7.839 7.963 8.422 8.694 8.951 9.042 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 7.843 8.055 8.244 8.304 19 20 25 30 40 50 Appendix D (concluded) Period 1 2. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 13% 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 6.604 6.729 6.840 6.938 7.025 7.330 7.496 7.634 7.675 14% 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.265 6.373 6.467 15% 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 5.847 5.954 6.047 6.128 6.198 6.259 6.464 6.566 6.642 6.661 16% 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 5.668 5.749 5.818 5.877 5.929 6.097 6.177 6.233 6.246 17% 0.855 1.585 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 4.836 4.988 5.118 5.229 5.324 5.405 5.475 5.534 5.584 5.628 5.766 5.829 5.871 5.880 18% 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 5.353 5.467 5.517 5.548 5.554 Percent 19% 0.840 1.547 2.140 2.639 3.058 3.410 3.706 3.954 4.163 4.339 4.486 4.611 4.715 4.802 4.876 4.938 4.988 5.033 5.070 5.101 5.195 5.235 5.258 5.262 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.730 4.775 4.812 4.843 4.870 4.948 4.979 4.997 4.999 25% 0.800 1.440 1.952 2.362 2.689 2.951 3.161 3.329 3.463 3.571 3.656 3.725 3.780 3.824 3.859 3.887 3.910 3.928 3.942 3.954 3.985 3.995 3.999 4.000 30% 0.769 1.361 1.816 2.166 2.436 2.643 2.802 2.925 3.019 3.092 3.147 3.190 3.223 3.249 3.268 3.283 3.295 3.304 3.311 3.316 3.329 3.332 3.333 3.333 35% 0.741 1.289 1.696 1.997 2.220 2.385 2.508 2.598 2.665 2.715 2.752 2.779 2.799 2.814 2.825 2.834 2.840 2.844 2.848 2.850 2.856 2.857 2.857 2.857 40% 0.714 1.224 1.589 1.849 2.035 2.168 2.263 2.331 2.379 2.414 2.438 2.456 2.469 2.478 2.484 2.489 2.492 2.494 2.496 2.497 2.499 2.500 2.500 2.500 50% 0.667 1.111 1.407 1.605 1.737 1.824 1.883 1.922 1.948 1.965 1.977 1.985 1.990 1.993 1.995 1.997 1.998 1.999 1.999 1.999 2.000 2.000 2.000 2.000 6.550 6.623 6.873 7.003 7.105 7.133