The Duval Corporation has recently evaluated a proposal to invest in cost-reducing production technology. According to the evaluation, the project would require an initial investment of $17,166 and would provide equal annual cost savings for five years. Based on a 10 percent discount rate, the project generates a net present value of $1,788 . The project is not expected to have any salvage value
at the end of its five-year life. Refer to Duval Corporation. What is the project's expected internal rate of return? Present value tables or a financial calculator are required.
a. 10%
b. 11%
c. 13%
d. 14%
D
IRR = 17,166/5,000 = 3.4332
Use PV of Annuity table 5 years
Constant corresponds to an IRR of 14%
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