Part Six

APPLY THE CONCEPTS:Internal rate of return

The Rydell purchasing department has made revisions to their costs and annual cash flows for Project A and Project B, as outlined below.Project A

Project B

Project A's revised investment is $236,100. The project's life and cash flow have changed to 7 years and $48,500, respectively, while expenses have been eliminated.Project B's revised investment is $141,500. The project's life and cash flow have changed to 6 years and $87,500 while expenses reduced slightly to $55,000.Compute the internal rate of return factor for Project A and Project B and then identify each project's corresponding percentage from the PV ordinary annuity table.

Note: Enter the IRR factor, to 5 decimal places

Project A: The calculated IRR factor is______and this value corresponds to which percentage in the present value of ordinary annuity table?______%

Project B: The calculated IRR factor is______and this value corresponds to which percentage in the present value of ordinary annuity table?_____%