(Ignore Income Taxes in This Problem

question 71

Essay

(Ignore income taxes in this problem.) Tranter, Inc., is considering a project that would have a ten-year life and would require a $1,500,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 12%.
Required:
a. Compute the project's net present value.
b. Compute the project's internal rate of return to the nearest whole percent.
c. Compute the project's payback period.
d. Compute the project's simple rate of return.

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Definitions:

Singular Proposition

A statement or assertion that applies to a specific individual or distinct entity, rather than to members of a class as a whole.

Categorical Syllogism

A deductive argument containing two categorical premises, a categorical conclusion, and three terms—major, minor, and middle—with each term occurring in two propositions.

Categorical Syllogism

A form of deductive argument that consists of three categorical propositions (a major premise, a minor premise, and a conclusion) that relates three different terms.

Major Premise

In a syllogism, the broader statement that provides the initial argument from which a conclusion is derived.