Welch Corporation is planning an investment with the following characteristics (Ignore income taxes.): Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.
The initial cost of the equipment is closest to:

Question

Welch Corporation is planning an investment with the following characteristics (Ignore income taxes.):  Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.
The initial cost of the equipment is closest to:

Quizplus · Accepted Answer

The internal rate of return is the rate of return at which the net present value of the project is zero.
Net present value = -Investment required + (Net annual cash inflow × Present value factor of an annuity for 6 years at 18%)
$0 = -Investment required + ($45,000 × 3.498)
Investment required = $45,000 × 3.498 = $157,410

Welch Corporation Is Planning an Investment with the Following Characteristics