Pattis Project has a first cost of P, annual savings A, and a salvage value of 1000 at the end of...

Question:

Pattis Project has a first cost of P, annual savings A, and a salvage value of 1000 at the end of the 10 year service life. she has calculated the present worth as 20000, the annual worth as 4000 and the payback period as three years what is the irr for this project.

Equivalent Annual Worth:

For a given project, the inflow of cash might be different from the outflow of cash at any given point in time, making cash projection difficult. The equivalent annual worth converts a cash flow with non-constant payments to an annuity that has the same present value.

Answer and Explanation:

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The internal rate of return is the discount rate that equates the present value of cash inflows to the present value of cash outflows. In this case,...

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Internal Rate of Return: Advantages & Disadvantages

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Chapter 9 / Lesson 5
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This lesson defines and explains the use of the internal rate of return. The lesson also explains the advantages and disadvantages of the internal rate of return.


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