Internal Rate of Return Method for a Service Company

The Riverton Company, a Utah ski resort, recently announced a $762,750 expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $135,000 in equal annual cash flows for each of the first 10 years of the project life.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	1.833	1.736	1.690	1.626	1.528
3	2.673	2.487	2.402	2.283	2.106
4	3.465	3.170	3.037	2.855	2.589
5	4.212	3.791	3.605	3.352	2.991
6	4.917	4.355	4.111	3.784	3.326
7	5.582	4.868	4.564	4.160	3.605
8	6.210	5.335	4.968	4.487	3.837
9	6.802	5.759	5.328	4.772	4.031
10	7.360	6.145	5.650	5.019	4.192

a. Determine the expected internal rate of return of this project for 10 years, using the present value of an annuity of $1 table above. If required, round your final answer to the nearest whole percent. %

b. What are some uncertainties that could reduce the internal rate of return of this project?