Park Co. is considering an investment that requires immediate payment of $26,945 and provides expected cash inflows of $8,500 annually for four years. Park Co. requires a 7% return on its investments.
1a. What is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)

1a. What is the internal rate of return? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)
Answer 1a:
Net present value = $1,846
Workings are as below:
Answer 1a:
Internal rate of return = 10.00%
Workings:
Initial investment = $26,945
Annual cash flow = $8,500 for 4 years
To find IRR from given tables, we need to get PV factor where
Initial investment = PV factor * Annual Cash flow
PV factor = $26,945 / $8,500 = 3.1700
From table PVA of $1 in the raw for period 4, we find PV factor of 3.1700 correspond to discount rate of 10%
Hence IRR = 10.00%
Get Answers For Free
Most questions answered within 1 hours.