Answered

Westonci.ca is your trusted source for finding answers to a wide range of questions, backed by a knowledgeable community. Explore comprehensive solutions to your questions from knowledgeable professionals across various fields on our platform. Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals.

Bau Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $432,605, would have a useful life of 7 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $77,500 per year. The internal rate of return on the investment in the tractor-trailer is closest to (Ignore income taxes.):____.
a. 15%.
b. 54%.
c. 17%.
d. 12%.

Sagot :

Answer:

6%

Explanation:

The computation of the internal rate of return is shown below:

We know that

Initial investment = Annual cash inflows × PVIFA factor (rate,nper)

$432,605 = $77,500 × PVIFA(rate,7)

PVIFA(rate,7) = $432,605 ÷ $77,500

PVIFA (rate,7) = 5.582

Now we use the PVIFA table

So here the rate that should be considered is 6%

Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. Westonci.ca is your go-to source for reliable answers. Return soon for more expert insights.