Chapter 7 Rate of Return Analysis D-78 Which of the following equations can be u

Question

Chapter 7 Rate of Return Analysis D-78 Which of the following equations can be used to find the internal rate of return (1) for a project initial investment of P, net annual cash flows of and salvage value of S after n years? (b) (P-NPA, i%, n)= SPF, i%, n) (c)-A =-PVP, i%, n)-SAF, i%, n-1) (d) 0=-P F/P,1%,n) + A(FA, i%, n) + S D-79 The rate of return on an investment of $1500 that doubles in value over a 4-year period, and produces a $300 annual cash flow, is nearest to which value? (a) 15% (b) 20% (c) 25% (d) 30%

Explanation / Answer

78) Interal rate of return is the return at which the net present value or net future value of a project is 0. Here equation a) and d) are the correct answer as they both show that net present or future value is zero and the equations are in correct format.

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