Answered: Amount Invested Annual Net Cash Flow…

Business

Accounting

Amount Invested Annual Net Cash Flow Present Value Factor %3D Internal Rate of Return

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 10MCQ

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A company is considering investing in a new machine that requires a cash payment of $50,939 today. The machine will generate annual cash flows of $21,208 for the next three years.

What is the internal rate of return if the company buys this machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Amount Invested
Annual Net Cash Flow
Present Value Factor
%3D
Internal Rate of Return

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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