Cooper Industries is considering a project that would require an initial investment of $101,000.The project would result in cost savings of $62,000 in year 1 and $70,000 in year two.The internal rate of return is

Question

Quizplus · Accepted Answer

Support:
At 18%, the two discount factors would be .847 and .718
($62,000 × .847) + ($70,000 × .718) = $102,774
 
At 20% the two discount factors would be .833 and .694
($62,000 × .833) + ($70,000 × .694) = $100,226
OR
 
Average cost savings = $66,000
10,000 / $66,000 = 1.5303
@ 18% PV Factor = 1.56564
@ 20% PV Factor = 1.52778

Cooper Industries Is Considering a Project That Would Require an Initial