Homework answers / question archive / Adam Ball has an opportunity to invest in a project that will yield four annual payments of $12,000 with no salvage

Adam Ball has an opportunity to invest in a project that will yield four annual payments of $12,000 with no salvage

Accounting

Share With

Adam Ball has an opportunity to invest in a project that will yield four annual payments of $12,000 with no salvage. The first payment will be received in exactly one year. On low-risk projects of this type, Ball requires a return of 6 percent. Based on this requirement, the project generates a profitability index of 1.03953.

Present value tables or a financial calculator are required.

1. 1. How much is Adam required to invest in this project?
   2. What is the internal rate of return on Adam’s project?