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Question

Keystone Healthcare Corp. is proposing to spend $260,820 on an eight-year project that has estimated net cash flows of$42,000 for each of the eight years.

a. Compute the net present value, using a rate of return of 10%. Use the present value of an annuity of $1 table in the chapter.

b. Based on the analysis prepared in part (a), is the rate of return (1) more than 10%, (2) 10%, or (3) less than 10%? Explain.

c. Determine the internal rate of return by computing a present value factor for an annuity of$1 and using the present value of an annuity of $1 table presented in the text.

Solution

VerifiedAnswered 1 year ago

Answered 1 year ago

Step 1

1 of 10This exercise will determine the *Net Present Value* and *Internal Rate of Return* of an eight-year project.

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