The Following Data Pertain to an Investment Proposal $$\begin{array} { | l | l |} \hline \text { Projected Salvage Value } & \$ - 0 \\\hline\end{array}$$

question 91

Multiple Choice

The following data pertain to an investment proposal:
$\begin{array}{|l|r|}\hline \text { Present Investment Required } & \$ 27,130 \\\hline \text { Annual Cost Savings } & \$ 5,000 \\\hline \text { Projected life the investment } & 10 \text { years } \\\hline\end{array}$
$$\begin{array} { | l | l |} \hline \text { Projected Salvage Value } & \$ - 0 \\\hline\end{array}$$
What would be the internal rate of return? (Ignore income taxes in this problem.)

• A) 5.426%.
• B) 13.0%.
• C) 54.26%.
• D) 542.6%.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds over a period, which can include payments on loans, bonds, or other forms of debt.

Bond Issued At Premium

A scenario when a bond is sold for more than its face value due to interest rates being lower than the bond's coupon rate.

Journal Entry

A record in accounting that represents a transaction where debits and credits are equal, showing a company's financial transactions.

Stockholders' Equity

Funds contributed by the shareholders plus the company's earnings retained over time, reflecting the ownership value in the firm.