Reference no: EM132528433

Westmont Publishing is considering the purchase of a used printing press costing $75,200. The printing press would generate a net cash inflow of $31,310 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent.

The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:

Cost of Capital

Period           8%           10%               12%            14%           16%

2            1.78326       1.73554        1.69005         1.64666          1.60523

3               2.57710       2.48685          2.40183          2.32163         2.24589

4           3.31213             3.16987          3.03735          2.91371           2.79818

Question 1: The investments internal rate of return (rounded to the nearest percent) is:

Option A) 10 percent

Option B) 16 percent

Option C) 14 percent

Option D) 12 percent