Question
Paul, Inc. is planning to invest $120,000 in a ten-year project. Paul estimates that the annual cash inflow, net of income taxes, from this project
Paul, Inc. is planning to invest $120,000 in a ten-year project. Paul estimates that the annual cash inflow, net of income taxes, from this project will be $22,000. Paul's required rate of return on investments of this type is 10%. Information on present value factors is as follows: At 10%, Present value of $1 for ten periods = 0.386; Present value of an annuity of $1 for ten periods = 6.145; At 12%, Present value of $1 for ten periods = 0.322; Present value of an annuity of $1 for ten periods = 5.650. Paul's internal rate of return on this investment is
A. Less than 10%.
B. 10%.
C. Greater than 10% and less than 12%.
D. 12%.
E. Greater than 12%.
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