The internal rate of return of the project is closest to:

A) 14%
B) 16%
C) 18%
D) 20%

Question

The internal rate of return of the project is closest to:A) 14%B) 16%C) 18%D) 20%

Mathew OrtizGarcia · Accepted Answer

Final Answer : C, Explanation :  Factor of the internal rate of return = Investment required ÷ Annual net cash inflow= $940,000 ÷ $300,000 = 3.133This factor is closest to the present value of an annuity over 5 periods at 18%.Reference: CH12-Ref15(Ignore income taxes in this problem.)Jojola Corporation is investigating buying a small used aircraft for the use of its executives.The aircraft would have a useful life of 5 years.The company uses a discount rate of 13% in its capital budgeting.The net present value of the initial investment and the annual operating cash cost is -$439,238.Management is having difficulty estimating the annual benefit of having the aircraft and estimating the salvage value of the aircraft.

The internal rate of return of the project is closest to:

A) 14%
B) 16%
C) 18%
D) 20%

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