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Compute the net present value

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Problem - Net present value method and internal rate of return method - Wisconsin Healthcare Corp. is proposing to spend $3,810,000 on a project that has estimated net cash flows of $620,000 for each of the 10 years.

Required -

a. Compute the net present value, using a rate of return of 12%. Use the table of present values of an annuity of $1 in the chapter.

b. Based on the analysis prepared in part (a), is the rate of return (1) more than 12% (2) 12%, or (3) less than 12%? Explain.

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

Reference no: EM132707002

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