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Net Present Value Method and Internal Rate of Return Method for a service company Buckeye Healthcare Corp. is proposing to spend $102,357 on a five-year
Net Present Value Method and Internal Rate of Return Method for a service company Buckeye Healthcare Corp. is proposing to spend $102,357 on a five-year project that has estimated net cash flows of $27,000 for each of the five years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 2 0.943 1.833 0.893 1.690 0.870 1.626 0.833 1.528 0.909 1.736 2.487 3.170 2.673 2.402 2.283 2.106 3.465 3.037 2.855 2.589 4.212 3.791 3.605 3.352 2.991 4.917 4.355 4.111 3.326 Bovo u Aw N 3.784 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 5.759 6.802 7.360 5.328 4.772 4.031 5.6505.0194.192 6.145 a. Compute the net present value, using a rate of return of 12%. 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 + Net present value + b. Based on the analysis prepared in part (a), is the rate of return (1) more than 12%, (2) 12%, or (3) less than 12%? 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. %
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