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Question 8.P.5: Find the ROR for cash flows of -$50 000 in year 0 and +$I6 7......

Find the ROR for cash flows of -$50 000 in year 0 and +$I6 719 each year in years 1-5.

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From (8.2),

NPV = -|CF_0| + A(PIA, i%, n)  (8.2)

0 = -$50 000+ $16 719(P/A, i*%, 5)

(A/P, i*%, 5) = \frac{\$16  719}{\$50  000} = 0.33438

Locating the combination n = 5, A/P = 0.33438 in Appendix A, we see that i* = 20%.

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