Question

# Park Co. is considering an investment that requires immediate payment of \$26,945 and provides expected cash...

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.

1-a. 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.)

 Cash Flow Select Chart Amount x PV Factor = Present Value Annual cash flow = \$0 Net present value

1-a. 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.)

Net present value = \$1,846

Workings are as below: 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%

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