Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $228,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) C1 C2 C3
Year 1 12,000 96,000 180,000
Year 2 108,000 96,000 60,000
Year 3 168,000 96,000 48,000
Totals 288,000 288,000 288,000
Assuming that the company requires a 12% return from its investments, use net present value to determine which projects, if any, should be acquired.
Project C1
Initial Investment
Chart values are based on:
i =
Year Cash inflow x Table factor = Present Value
1 =
2 =
3 =
Project C2
Initial Investment
Year Cash inflow x Table factor = Present Value
1 =
2 =
3 =
Project C3
Initial Investment
Year Cash inflow x Table factor = Present Value
1 =
2 =
3 =
Compute the internal rate of return for project C2.
Internal Rate of return =