Figure 14-11
Present Value of an Annuity of $1 in Arrears

question 141

Essay

Figure 14-11
Present value of an annuity of $1 in arrears $\begin{array}{|c|l|l|l|l|l|l|}\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \\\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \\\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 4.433 \\\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \\\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \\\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \\\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \\\hline\end{array}$
-Refer to Figure 14-11.Mattress Firm is considering an investment in equipment that will have an initial cost of $600,000 yielding annual net cash inflows of $110,000.Yearly depreciation will be $60,000.The equipment is expected to be useful for 10 years,then it will be scrapped.Mattress Firm requires a minimum rate of return of 10%. A. What is the payback period?
B. What is the accounting rate of return?
C. What is the net present value?
D. What is the approximate internal rate of return?

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Definitions:

Withdrawal Mechanism

Psychological or physical strategies used by individuals to disengage or disconnect from stressful or uncomfortable situations.

Managing Interpersonal Conflict

The process of handling personal disagreements or disputes in a constructive and respectful manner.

Rationalization

The process of finding logical explanations for behaviors, decisions, or feelings that may otherwise appear irrational.

Superordinate Goal

An organizational goal that is more important to both parties in a conflict than their individual or group goals.