Present value of an annuity of $1 in arrears
$\begin{array}{|c|l|l|l|l|l|l|}
\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \
\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \
\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \
\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \
\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 4.433 \
\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \
\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \
\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \
\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \
\hline
\end{array}$
-Refer to the Figure.Coriander Company is considering a project with an initial investment of $426,800 in new equipment that will yield annual net cash flows of $80,000 and will be depreciated at $53,350 per year over its eight-year life.What is the internal rate of return?

Question

Present value of an annuity of $1 in arrears
 $\begin{array}{|c|l|l|l|l|l|l|}
\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \
\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \
\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \
\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \
\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 4.433 \
\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \
\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \
\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \
\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \
\hline
\end{array}$
-Refer to the Figure.Coriander Company is considering a project with an initial investment of $426,800 in new equipment that will yield annual net cash flows of $80,000 and will be depreciated at $53,350 per year over its eight-year life.What is the internal rate of return?

Quizplus · Accepted Answer

The internal rate of return is the discount rate that makes the net present value of a project equal to zero. In this case, the net present value is:NPV = -426,800 + 80,000 * (PVIFA(r,8) - 1/r) - 53,350 * (PVIFA(r,8))where r is the internal rate of return.Using a financial calculator, we can find that the internal rate of return is approximately 10%.

Present Value of an Annuity of $1 in Arrears -Refer to the Figure