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aeamormation [The following information applies to the questions displayed below.] Park Co. is considering an invest...

aeamormation [The following information applies to the questions displayed below.] Park Co. is considering an investment that

aeamormation [The following information applies to the questions displayed below.] Park Co. is considering an investment that requires immediate payment of $20,957 and provides expected cash inflows of $6,900 annually for four years. Park Co. requires a 9% return on its investments 1-a. What is the internal rate of return? (PVof $1. EV of $1, PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)
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ReportAnswer #1
CASH FLOW FROM THE PROJECT
Years Cash Flows
0 -$20,957
1 $6,900
2 $6,900
3 $6,900
4 $6,900
Total $6,643
IRR : IRR Means with a particular Percentage rate , At that point the present value become the zero
CALCULATION OF THE IRR OF THE PROJECT
First we calculate randomly present value with @ 12% discounting rate
Years Cash Flows PVF @12% Present Value
0 -$20,957 1 -$20,957.00
1 $6,900 0.8929 $6,161.01
2 $6,900 0.7972 $5,500.68
3 $6,900 0.7118 $4,911.42
4 $6,900 0.6355 $4,384.95
Net Present Value = $1.06
With PVF of 12% we are getting positive = $1.06
Secondly we calculate randomly present value @ 13 % discounting rate
Years Cash Flows PVF @ 13% Present Value
0 -$20,957 1 -$20,957.00
1 $6,900 0.8850 $6,106.50
2 $6,900 0.7832 $5,404.08
3 $6,900 0.6931 $4,782.39
4 $6,900 0.6134 $4,232.46
Net Present Value = -$431.57
With PVF of 13 % we are getting negative =                   -431.57
In the given case the pv with 12% is coming to postive means the present value is more
then 12 % but with 13 % Present value cash flow become negative so the prese-nt value
is between 12% and 13 %
So the differecne in both % net present value is = $1.06 - -$431.57
Total is become = $432.63
So , the difference % = $1.06 "/"By $432.63
So , the difference % = 0.0025
So, the IRR = 12.0025%
Answer = IRR = (Round off) 12.00%
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