QUESTION 11
Present value of an Annuity of $1 in Arrears
Periods 
4% 
6% 
8% 
10% 
12% 
14% 
1 
0.962 
0.943 
0.926 
0.909 
0.893 
0.877 
2 
1.886 
1.833 
1.783 
1.736 
1.690 
1.647 
3 
2.775 
2.673 
2.577 
2.487 
2.402 
2.322 
4 
3.630 
3.465 
3.312 
3.170 
3.037 
2.914 
5 
4.452 
4.212 
3.993 
3.791 
3.605 
4.433 
6 
5.242 
4.917 
4.623 
4.355 
4.111 
3.889 
7 
6.002 
5.582 
5.206 
4.868 
4.564 
4.288 
8 
6.733 
6.210 
5.747 
5.335 
4.968 
4.639 
9 
7.435 
6.802 
6.247 
5.759 
5.328 
4.946 
10 
8.111 
7.360 
6.710 
6.145 
5.650 
5.216 
Ruby Company is considering a project with an initial investment of $300,000 that will yield annual net cash flows of $90,580 and will be depreciated at $75,000 per year over its 4 year life. What is the internal rate of return? (Note: Round the discount factor to three decimal places.)
a. 
12% 

b. 
10% 

c. 
8% 

d. 
14% 

e. 
6% 
c.8%.
IRR is the rate at which the present value of cash outflow equal present value of cash inflows.
here,
present value of cash outflows = $300,000
present value of cash inflows = $90,580 * present value of annuity factor
at IRR
$300,000 = 90,580 * present value of annuity factor
=> present value of annuity factor = 300,000 / 90,580
=>3.312.
from the table of annuity
we can see that for 4 periods, the factor 3.312 falls under 8%.
so the IRR for the given problem is 8%.
QUESTION 11 Present value of an Annuity of $1 in Arrears Periods 4% 6% 8%...
Present value of $1 Periods 4% 6% 8% 10% 12% 14% 1 0.962 0.943 0.926 0.909 0.893 0.877 2 0.925 0.890 0.857 0.826 0.797 0.769 3 0.889 0.840 0.794 0.751 0.712 0.675 4 0.855 0.792 0.735 0.683 0.636 0.592 5 0.822 0.747 0.681 0.621 0.567 0.519 6 0.790 0.705 0.630 0.564 0.507 0.456 7 0.760 0.665 0.583 0.513 0.452 0.400 8 0.731 0.627 0.540 0.467 0.404 0.351 9 0.703 0.592 0.500 0.424 0.361 0.308 10 0.676 0.558 0.463 0.386 0.322...
Present value of $1 Periods 4% 6% 8% 10% 12% 14% 1 0.962 0.943 0.926 0.909 0.893 0.877 2 0.925 0.890 0.857 0.826 0.797 0.769 3 0.889 0.840 0.794 0.751 0.712 0.675 4 0.855 0.792 0.735 0.683 0.636 0.592 5 0.822 0.747 0.681 0.621 0.567 0.519 6 0.790 0.705 0.630 0.564 0.507 0.456 7 0.760 0.665 0.583 0.513 0.452 0.400 8 0.731 0.627 0.540 0.467 0.404 0.351 9 0.703 0.592 0.500 0.424 0.361 0.308 10 0.676 0.558 0.463 0.386 0.322...
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