Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Chapter 11, Problem 16E
(A)
To determine
Determine the
(B)
To determine
Locate the present value factor in annuity table (Exhibit 5).
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Internal Rate of Return Method
The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $51,629 and
annual net cash flows of $17,000 for each of the four 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
3.353
2.991
4.917
4.355
4.111
3.785
3.326
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.
%
Internal Rate of Return Method
The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $49,191 and annual net cash flows of $19,000 for each of the four 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.fill in the blank 1
b. Using the factor determined in part (a) and the present value of an annuity of $1 table above,…
Internal Rate of Return Method
The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of
$22,710 and annual net cash flows of $6,000 for each of the six 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
3.465
3.170
3.037
2.855
2.589
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
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.
%
Chapter 11 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 11 - What are the principal objections to the use of...Ch. 11 - Discuss the principal limitations of the cash...Ch. 11 - Prob. 3DQCh. 11 - Your boss has suggested that a one-year payback...Ch. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - A net present value analysis used to evaluate a...Ch. 11 - Two projects have an identical net present value...Ch. 11 - Prob. 9DQCh. 11 - What are the major disadvantages of the use of the...
Ch. 11 - Prob. 11DQCh. 11 - Prob. 12DQCh. 11 - Prob. 1BECh. 11 - Prob. 2BECh. 11 - Prob. 3BECh. 11 - Prob. 4BECh. 11 - Prob. 5BECh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Cash payback method Lily Products Company is...Ch. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 - Prob. 9ECh. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Net present value-unequal lives Bunker Hill Mining...Ch. 11 - Prob. 22ECh. 11 - Average rate of return method, net present value...Ch. 11 - Prob. 2PACh. 11 - Net present value method, present value index, and...Ch. 11 - Net present value method, internal rate of return...Ch. 11 - Prob. 5PACh. 11 - Prob. 6PACh. 11 - Prob. 1PBCh. 11 - Prob. 2PBCh. 11 - Net present value method, present value index, and...Ch. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Prob. 6PBCh. 11 - Prob. 1ADMCh. 11 - Prob. 2ADMCh. 11 - Prob. 3ADMCh. 11 - Ethics in Action Danielle Hastings was recently...
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