(Present Value Tables Are Needed

question 179

Multiple Choice

(Present value tables are needed.) Somerville Corporation is considering investing in specialized equipment costing $618,000. The equipment has a useful life of 5 years and a residual value of $55,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are: Somerville Corporation's required rate of return is 14%.
Is the internal rate of return of the investment equal to, higher than, or lower than 14%?

• A)Equal to 14%
• B)Higher than 14%
• C)Lower than 14%
• D)Cannot be determined from the given data

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