The internal rate of return: Does not require a predetermined discount rate Is o
ID: 2499602 • Letter: T
Question
The internal rate of return:
Does not require a predetermined discount rate
Is often used to rank investment proposals
May be compared to the cost of capital in project evaluation
All of the above
Clarinet Publishing is considering the purchase of a used printing press costing $38,400. The printing press would generate a net cash inflow of $20,000 a year for 5 years. At the end of 5 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation.
The project’s accounting
32 percent
19 percent
39 percent
75 percent
Long Horn Medical Services is considering an investment of $100,000. Data related to the investment and present value factors are as follows:
Year
Cash Inflows
Present Value of $1.00
1
$50,000
0.85
2
46,000
0.72
3
60,000
0.61
4
80,000
0.52
5
50,000
0.44
The investment’s net present value is:
$ 62,920
$120,000
$175,820
$ 75,820
Does not require a predetermined discount rate
Is often used to rank investment proposals
May be compared to the cost of capital in project evaluation
All of the above
Explanation / Answer
Answer: (1) All of the above
The internal rate of return:
Does not require a predetermined discount rate
Is often used to rank investment proposals
May be compared to the cost of capital in project evaluation
Answer 2: 32%
Answer: 3 NPV = $75820
Year Net Cash Flows Depreciation: (38400/5) Accounting Profit 0 -38400 1 20000 -7680 12320 2 20000 -7680 12320 3 20000 -7680 12320 4 20000 -7680 12320 5 20000 -7680 12320Related Questions
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