Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Net Present Value Method and Internal Rate of Return Method for a service company Buckeye Healthcare Corp. is proposing to spend $85,248 on a nine-year
Net Present Value Method and Internal Rate of Return Method for a service company Buckeye Healthcare Corp. is proposing to spend $85,248 on a nine-year project that has estimated net cash flows of $16,000 for each of the nine years. 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. Compute the net present value, using a rate of return of 15%. Use the table of present value of an annuity of $1 presented above. If required, round to the nearest dollar. Use the minus sign to indicate a negative net present value. Present value of annual net cash flows Less amount to be invested 85,248 Net present value b. Based on the analysis prepared in part (a), is the rate of return (1) more than 15%, (2) 15%, or (3) less than 15%? Less than 15% c. Determine the internal rate of return by computing a present value factor for an annuity of $1 and using the table of the present value of an annuity of $1 presented above. X %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started