Candela Cable Company is considering investing $450,000 in telecommunications equipment that has an estimated life of five years with no residual value
The cash flows are as shown below:
Year 1 $120,000
2 235,000
3 140,000
4 98,000
The present value of $1:
10% 11% 12% 13% 14%
1 0.909 0.901 0.893 0.885 0.877
2 0.826 0.812 0.797 0.783 0.769
3 0.751 0.731 0.712 0.693 0.675
4 0.683 0.659 0.636 0.613 0.592
5 0.621 0.593 0.567 0.543 0.519
The IRR of the project would be ________.
A) between 12% and 13%
B) more than 13%
C) less than 10%
D) between 9% and 10%
A .A)
At 10% $120,000 0.909 $109,080
$235,000 0.826 194,110
$140,000 0.751 105,140
$98,000 0.683 66,934
(450,000 )
Net Present Value $25,264
At 12% $120,000 0.893 $107,160
$235,000 0.797 187,295
$140,000 0.712 99,680
$98,000 0.636 62,328
(450,000 )
Net Present Value $6,463
At 13% $120,000 0.885 $106,200
$235,000 0.783 184,005
$140,000 0.693 97,020
$98,000 0.613 60,074
(450,000 )
Net Present Value $(2,701 )
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