Internal Rate of Return Method for a Service CompanyThe Riverton Company, a ski resort, recently announced a $601,326 expansion to lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $198,000 in equal annual cash flows for each of the first four years of the project life.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.52832.6732.4872.4022.2832.10643.4653.1703.0372.8552.58954.2123.7913.6053.3532.99164.9174.3554.1113.7853.32675.5824.8684.5644.1603.60586.2105.3354.9684.4873.83796.8025.7595.3284.7724.031107.3606.1455.6505.0194.192a. Determine the expected internal rate of return of this project for four years, using the present value of an annuity of $1 table above. If required, round your final answer to the nearest whole percent.fill in the blank 1 %

Internal Rate of Return is the rate at which NPV of the project is zero.

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Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 17E

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Internal Rate of Return Method for a Service Company

The Riverton Company, a ski resort, recently announced a $601,326 expansion to lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $198,000 in equal annual cash flows for each of the first four years of the project 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	3.353	2.991
6	4.917	4.355	4.111	3.785	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 the expected internal rate of return of this project for four years, using the present value of an annuity of $1 table above. If required, round your final answer to the nearest whole percent.
fill in the blank 1 %

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