The internal rate of return method Assignment | College Homework Help

  1. The internal rate of return method is used by King Bros. Construction Co. in analyzing a capital expenditure proposal that involves an investment of $44,160 and annual net cash flows of $6,000 for each of the 10 years of its useful life.
    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. Determine a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round your answer to three decimal places.

    b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal.
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