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Determine the internal rate of return

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Problem - Net present value method and internal rate of return method

Hawkeye Healthcare Corp. is proposing to spend $134,136 on an eight-year project that has estimated net cash flows of $27,000 for each of the eight years.

a. Compute the net present value, using a rate of return of 15%. 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 15%, (2) 15%, or (3) less than 15%? 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.

Reference no: EM132690493

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