Madison Company is considering two investments. The relevant data follows: Cost

Question

Madison Company is considering two investments. The relevant data follows: Cost       200,000          300,000 Annual cash savings(end of year)         50,692            60,995 Terminal salvage value         50,000            70,000 Estimated useful life in years   5 5 Minimum desired rate of return 10% 10% Method of depreciation   SL SL PV of 1% PV of Annuity for 5 Periods for 5 Periods 5% 0.7835 4.3295 6% 0.7473 4.2124 7% 0.713 4.1002 8% 0.6806 3.9927 10% 0.6209 3.7908 12% 0.5674 3.6048 14% 0.5194 3.4331 Ignoring taxes, the internal rate of return for Project A is approximately ________. SHOW WORK Madison Company is considering two investments. The relevant data follows: Cost       200,000          300,000 Annual cash savings(end of year)         50,692            60,995 Terminal salvage value         50,000            70,000 Estimated useful life in years   5 5 Minimum desired rate of return 10% 10% Method of depreciation   SL SL PV of 1% PV of Annuity for 5 Periods for 5 Periods 5% 0.7835 4.3295 6% 0.7473 4.2124 7% 0.713 4.1002 8% 0.6806 3.9927 10% 0.6209 3.7908 12% 0.5674 3.6048 14% 0.5194 3.4331 Ignoring taxes, the internal rate of return for Project A is approximately ________. SHOW WORK

Explanation / Answer

Ignoring taxes, the internal rate of return for Project A is approximately 40 %________. SHOW WORK

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