Internal Rate of Return Method The internal rate of return method is used by King Bros. Construction Co. in analyzing a capital expenditure proposal that involves an investment of $88,506 and annual net cash flows of $18,000 for each of the six years of its useful 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 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 a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round your answer to three decimal places. b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal. % Cash payback period for a Service Company Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000. Location 1 is expected to provide equal annual net cash flows of $30,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $68,000 Year 5 $22,000 Year 2 51,000 Year 6 16,000 Year 3 31,000 Year 7 13,000 Year 4 29,000 Year 8 10,000 Determine the cash payback period for both location proposals. Location 1 years Location 2 years Average Rate of Return-Cost Savings Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $131,000 with a $11,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $26,880 per year. In addition, the equipment will have operating and energy costs of $6,360 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. %