A Company Is Considering a Five-Year Project

question 136

Essay

A company is considering a five-year project.It plans to invest $80,000 now and it forecasts cash inflows for each year of $22,857.The company requires a hurdle rate of 12%.Calculate the internal rate of return to determine whether it should accept this project.Selected factors for a present value of an annuity of 1 for five years are shown below:
$\begin{array}{lc}\underline {\text { Interest }} &\underline {\text { Present Value of an Annuity of 1 }}\\ \underline{\text { Rate }}& \underline{\text { Factor }} \\{10 \%} &{3.7908}\\12 \% & 3.6048 \\14 \% & 34331\end{array}$

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Definitions:

Objectivity

The quality of being unbiased, not influenced by personal feelings or opinions in considering and representing facts.

Mental Operations

The processes of thinking and reasoning, including problem-solving, decision-making, and the manipulation of abstract concepts.

Object Permanence

The understanding in infants and young children that objects continue to exist even when they are not visible.

Sensory Perceptions

The process of receiving and interpreting information from the external world through the sensory organs.