1. nternal Rate of Return Method

   The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $49,332 and annual net cash flows of $12,000 for each of the six years of its useful life.

   Present Value of an Annuity of $1 at Compound Interest
   Year	6%	10%	12%	15%	20%
   1	0.943	0.909	0.893	0.870	0.833
   2	1.833	1.736	1.690	1.626	1.528
   3	2.673	2.487	2.402	2.283	2.106
   4	3.465	3.170	3.037	2.855	2.589
   5	4.212	3.791	3.605	3.352	2.991
   6	4.917	4.355	4.111	3.784	3.326
   7	5.582	4.868	4.564	4.160	3.605
   8	6.210	5.335	4.968	4.487	3.837
   9	6.802	5.759	5.328	4.772	4.031
   10	7.360	6.145	5.650	5.019	4.192

   a.  Determine a present value factor for an annuity of $1 which can be used in determining the internal rate of return. If required, round your answer to three decimal places.
   fill in the blank 1

   b.  Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal.
   fill in the blank 2 %

2.  
3.  

Internal Rate of Return Method for a Service Company

The Riverton Company, a ski resort, recently announced a $601,326 expansion to lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $198,000 in equal annual cash flows for each of the first four years of the project life.

a. Determine the expected internal rate of return of this project for four years, using the present value of an annuity of $1 table above. If required, round your final answer to the nearest whole percent.
fill in the blank 1 %