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Question 25.4: A project is estimated to cost $208,175 and provide annual n...

A project is estimated to cost $208,175 and provide annual net cash flows of $55,000 for six years. Determine the internal rate of return for this project, using Exhibit 2 on page 1168.

EXHIBIT 2 : Partial Present Value of an Annuity Table
Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736  1.690 1.626 1.528
3 2.673 2.487   2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791   3.605 3.353 2.991
6 4.917 4.355 4.111 3.785 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192
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15%      [($208,175/$55,000) = 3.785, the present value of an annuity factor for six periods at 15%, from Exhibit 2]

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