In which of the following situations will an annuity table be useful?
I.Calculating the net present value of an investment with equal cash flows for the first nine years, but a different flow in year 10
II.Calculating the internal rate of return of an investment with unequal cash flows each year
III.Calculating the net present value of an investment with an equal cash flow in years one through four, and a different equal cash flow in years 5 through 10

Question

Quizplus · Accepted Answer

An annuity table is useful for calculating the net present value (NPV) of investments with equal cash flows, like in situation III, and for calculating the internal rate of return (IRR), like in situation II. Situation I involves different cash flows in year 10, which means it does not fit the criteria of an annuity and would require a different calculation method.

In Which of the Following Situations Will an Annuity Table