Figure 14-8

question 82

Multiple Choice

Figure 14-8. Present value of an Annuity of $1 in Arrears
Refer to Figure 14-8.Sawyer Company is considering a project with an initial investment of $226,000 that will yield annual net cash flows of $40,000,and will be depreciated at $22,600 per year over its ten year life.What is the internal rate of return?

• A)6%
• B)8%
• C)10%
• D)12%
• E)14%

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Definitions:

Reserve Ratio

The portion of depositors' balances that banks must have on hand as cash, set by central banking authorities to ensure liquidity and stability in the banking system.

Additional Reserves

The excess funds that banks hold over the required minimum to meet reserve requirements set by a central bank.

Money

An economic unit that functions as a generally recognized medium of exchange for transactional purposes in an economy.

Reserve Requirement

The minimum amount of reserves that banks must hold, either in their vaults or with the central bank, as a proportion of deposits.