(Present Value Tables Are Needed Moreno Corporation's Required Rate of Return Is 14

question 21

Multiple Choice

(Present value tables are needed.) Moreno Corporation is considering investing in specialized equipment costing $525,000.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: $$\begin{array} { | c | c r | } \hline \text { Year 1 } & \$ & 245,000 \\\hline \text { Year 2 } & \$ & 190,000 \\\hline \text { Year 3 } & \$ & 152,000 \\\hline \text { Year 4 } & \$ & 112,000 \\\hline \text { Year 5 } & \$ & 95,000 \\\hline & \$ & 794,000 \\\hline\end{array}$$ Moreno Corporation's required rate of return is 14%.
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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