Answered

Discover the best answers at Westonci.ca, where experts share their insights and knowledge with you. Join our Q&A platform to get precise answers from experts in diverse fields and enhance your understanding. Explore comprehensive solutions to your questions from knowledgeable professionals across various fields on our platform.

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 trusting us with your questions. We're here to help you find accurate answers quickly and efficiently. Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.