# 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 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.)

 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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