Tanya Sinclair, owner of Sinclair Fine Wine, is considering investing $ 195,000 in a temperature-controlled wine storage room. She plans to rent space to customers and expects to generate $ 55,000 annually (rental charges less miscellaneous expenses other than depreciation).

Factor tables

Assuming Tanya wishes to evaluate the project with a 5-year time horizon, what is the internal rate of return of the investment? (Ignore taxes.) (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to 0 decimal places, e.g. 17%.)

1.) Internal rate of return

(enter internal rate of return in percentage rounded to 0 decimal place) %

2.) Should Tanya make the investment if her required rate of return is 10 percent?

TABLE B9.1 Present value of $1 due in n periods 6% 7% 8% 9% 10% 11% 1 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 2 0.8900 0.8734 0.8573 0.8417 0.8264 0.8116 3 0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 4 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 5 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 6 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 7 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 8 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 9 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 10 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 11 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 12 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 13 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 14 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 15 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 16 0.3936 0.3387 0.2919 0.2519 0.2176 0.1883 17 0.3714 0.3166 0.2703 0.2311 0.1978 0.1696 18 0.3503 0.2959 0.2502 0.2120 0.1799 0.1528 19 0.3305 0.2765 0.2317 0.1945 0.1635 0.1377 20 0.3118 0.2584 0.2145 0.1784 0.1486 0.1240 30% 0.7692 0.5917 0.4552 0.3501 0.2693 0.2072 12% 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066 0.4523 0.4039 0.3606 0.3220 0.2875 0.2567 0.2292 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 13% 0.8850 0.7831 0.6931 0.6133 0.5428 0.4803 0.4251 0.3762 0.3329 0.2946 0.2607 0.2307 0.2042 0.1807 0.1599 0.1415 0.1252 0.1108 0.0981 0.0868 14% 0.8772 0.7695 0.6750 0.5921 0.5194 0.4556 0.3996 0.3506 0.3075 0.2697 0.2366 15% 16% 0.8696 0.8621 0.7561 0.7432 0.6575 0.6407 0.5718 0.5523 0.4972 0.4761 0.4323 0.4104 0.3759 0.3538 0.3269 0.3050 0.2843 0.2630 0.2472 0.2267 0.2149 0.1954 0.1869 0.1685 0.1625 0.1452 0.1413 0.1252 0.1229 0.1079 0.1069 0.0930 0.0929 0.0802 0.0808 0.0691 0.0703 0.0596 0.0611 0.0514 20% 0.8333 0.6944 0.5787 0.4823 0.4019 0.3349 0.2791 0.2326 0.1938 0.1615 0.1346 0.1122 0.0935 0.0779 0.0649 0.0541 0.0451 0.0376 0.0313 0.0261 0.2076 0.1821 0.1597 0.1401 0.1229 0.1078 0.0946 0.0829 0.0728 0.1594 0.1226 0.0943 0.0725 0.0558 0.0429 0.0330 0.0254 0.0195 0.0150 0.0116 0.0089 0.0068 0.0053 0.1037 TABLE B9.2 Present value of an annuity of $1 per period 6% 7% 8% 9% 10% 11% 1 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 2 1.8334 1.8080 1.7833 1.7591 1.7355 1.7125 3 2.6730 2.6243 2.5771 2.5313 2.4869 2.4437 4 3.4651 3.3872 3.3121 3.2397 3.1699 3.1024 5 4.2124 4.1002 3.9927 3.8897 3.7908 3.6959 6 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 7 5.5824 5.3893 5.2064 5.0330 4.8684 4.7122 8 6.2098 5.9713 5.7466 5.5348 5.3349 5.1461 9 6.8017 6.5152 6.2469 5.9952 5.7590 5.5370 10 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 11 7.8869 7.4987 7.1390 6.8052 6.4951 6.2065 12 8.3838 7.9427 7.5361 7.1607 6.8137 6.4924 13 8.8527 8.3577 7.9038 7.4869 7.1034 6.7499 14 9.2950 8.7455 8.2442 7.7862 7.3667 6.9819 15 9.7122 9.1079 8.5595 8.0607 7.6061 7.1909 16 10.1059 9.4466 8.8514 8.3126 7.8237 7.3792 17 10.4773 9.7632 9.1216 8.5436 8.0216 7.5488 18 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 19 11.1581 10.3356 9.6036 8.9501 8.3649 7.8393 20 11.4699 10.5940 9.8181 9.1285 8.5136 7.9633 12% 0.8929 1.6901 2.4018 3.0373 3.6048 4.1114 4.5638 4.9676 5.3282 5.6502 5.9377 6.1944 6.4235 6.6282 6.8109 6.9740 7.1196 7.2497 7.3658 7.4694 13% 0.8850 1.6681 2.3612 2.9745 3.5172 3.9975 4.4226 4.7988 5.1317 5.4262 5.6869 5.9176 6.1218 6.3025 6.4624 6.6039 6.7291 6.8399 6.9380 7.0248 14% 0.8772 1.6467 2.3216 2.9137 3.4331 3.8887 4.2883 4.6389 4.9464 5.2161 5.4527 5.6603 5.8424 6.0021 6.1422 6.2651 6.3729 6.4674 6.5504 6.6231 15% 0.8696 1.6257 2.2832 2.8550 3.3522 3.7845 4.1604 4.4873 4.7716 5.0188 5.2337 5.4206 5.5831 5.7245 5.8474 5.9542 6.0472 6.1280 6.1982 6.2593 16% 0.8621 1.6052 2.2459 2.7982 3.2743 3.6847 4.0386 4.3436 4.6065 4.8332 5.0286 5.1971 5.3423 5.4675 5.5755 5.6685 5.7487 5.8178 5.8775 5.9288 20% 0.8333 1.5278 2.1065 2.5887 2.9906 3.3255 3.6046 3.8372 4.0310 4.1925 4.3271 4.4392 4.5327 4.6106 4.6755 4.7296 4.7746 4.8122 4.8435 4.8696 30% 0.7692 1.3609 1.8161 2.1662 2.4356 2.6427 2.8021 2.9247 3.0190 3.0915 3.1473 3.1903 3.2233 3.2487 3.2682 3.2832 3.2948 3.3037 3.3105 3.3158