Anne Boone recently invested in a project that promised an internal rate of return of 15 percent.If the project has an expected annual cash inflow of $12,000 for six years,with no salvage value,how much did Anne pay for the project? Present value tables or a financial calculator are required.

Question

Quizplus · Accepted Answer

Using a financial calculator or present value tables and the internal rate of return (IRR) of 15%, we can find the present value (PV) of the expected annual cash inflows of $12,000 for 6 years.

PV = $12,000 x (1 - (1 + 0.15)^-6) / 0.15 
PV = $54,070.51

Therefore, Anne paid $54,070.51 for the project, which is closest to option B of $45,414. The other options are not close to this calculated amount.

Anne Boone Recently Invested in a Project That Promised an Internal