Adam Ball has an opportunity to invest in a project that will yield four annual payments of $12,000

QUESTION

Adam Ball has an opportunity to invest in a project that will yield four annual payments of $12,000 with no salvage. The first payment will be received in exactly one year. On low-risk projects of this type, Ball requires a return of 6 percent. Based on this requirement, the project generates a profitability index of 1.03953.Present value tables or a financial calculator are required. b.What is the internal rate of return on Adam’s project?

ANSWER:

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