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Jack and Jill's Place is a nonprofit nursery school run by the parents of the enrolled children. Since the school is out of town, it has a well rather than a city water supply. Lately, the well has become unreliable, and the school has had to bring in bottled drinking water. The school's governing board is considering drilling a new well (at the top of the hill, naturally). The board estimates that a new well would cost $7,374 and save the school $1,200 annually for 10 years. The school's hurdle rate is 8 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Compute the internal rate of return on the new well. Should the governing board approve the new well? Internal rate of return Approve? Yes %

Jack and Jill's Place is a nonprofit nursery school run by the parents of the enrolled children. Since the school is out of town, it has a well rather than a city water supply. Lately, the well has become unreliable, and the school has had to bring in bottled drinking water. The school's governing board is considering drilling a new well (at the top of the hill, naturally). The board estimates that a new well would cost $7,374 and save the school $1,200 annually for 10 years. The school's hurdle rate is 8 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Compute the internal rate of return on the new well. Should the governing board approve the new well? Internal rate of return Approve? Yes %

CONCEPTS IN FED.TAX.,2020-W/ACCESS
CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 41P
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Jack and Jill's Place is a nonprofit nursery school run by the parents of the enrolled children. Since the school is out of town, it has a well rather than a city water supply. Lately, the well has become unreliable, and the school has had to bring in bottled drinking water. The school's governing board is considering drilling a new well (at the top of the hill, naturally). The board estimates that a new well would cost $7,374 and save the school $1,200 annually for 10 years. The school's hurdle rate is 8 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Compute the internal rate of return on the new well. Should the governing board approve the new well? Internal rate of return Approve? Yes %
Transcribed Image Text:Jack and Jill's Place is a nonprofit nursery school run by the parents of the enrolled children. Since the school is out of town, it has a well rather than a city water supply. Lately, the well has become unreliable, and the school has had to bring in bottled drinking water. The school's governing board is considering drilling a new well (at the top of the hill, naturally). The board estimates that a new well would cost $7,374 and save the school $1,200 annually for 10 years. The school's hurdle rate is 8 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Compute the internal rate of return on the new well. Should the governing board approve the new well? Internal rate of return Approve? Yes %
Future Value and Present Value Tables Table I Future Value of $1.00(1+r)^ Period 4% 1 1 2 3 + in 4 5 6 7 8 9 10 11 12 13 14 15 2 20 30 40 3 4 5 6 7 10 8 9 12 13 11 14 15 20 30 6 7 8 9 10 40 11 12 13 14 15 20 30 40 Period 4% 1 1.000 2 2.040 3 3.122 4 4.247 5 5.416 6 6.633 7 7.898 8 9.214 9 10.583 10 12.006 11 13.486 12 15.026 16.627 13 14 18.292 15 20.024 20 30 40 1.125 Table IV 1.040 1.060 1.080 1.082 1.124 1.170 1.217 1.265 1.316 1.369 1.423 1.480 Table III Present Value of $1.00 1.540 Period 4% 6% 6% 1.601 1.665 2.133 1.732 2.261 1.801 1.263 1.254 1.405 1.361 1.464 1.574 1.338 1.469 1.611 1.762 1.419 1.587 1.504 1.714 1.594 1.851 1.166 1.210 1.191 1.260 1.331 2.191 3.207 1.898 2.332 2.012 Period 4% 1 2 3 4 5 8% 1.690 1.999 2.359 1.791 2.159 2.594 6% 1.000 2.060 3.184 4.375 5.637 6.975 8.394 9.898 11.491 13.181 10% 12% 1.100 1.120 14.972 16.870 1.772 1.949 2.144 1 (1 + r)" 2.518 3.139 2.853 2.720 3.452 2.937 2.397 3.172 4.177 5.474 3.798 6% 1.974 8% 10% 12% 1.000 1.000 1.000 2.080 2.100 2.120 3.246 3.310 3.374 4.506 4.641 4.779 5.867 6.105 6.353 7.336 7.716 8.115 8.923 9.487 10.089 10.637 11.436 12.300 12.488 13.580 14.776 14.487 15.938 17.549 16.646 18.531 20.655 18.977 21.385 24.133 18.882 21.495 24.523 28.029 24.215 27.976 32.393 21.015 23.276 27.152 31.773 37.280 36.778 45.762 57.276 75.052 29.778 56.085 79.058 113.283 164.496 241.330 95.026 154.762 259.057 442.597 2.211 2.476 Table II Future Value of a Series of $1.00 Cash Flows (Ordinary Annuity) 8% 2.773 3.106 3.479 1 Present Value of Series of $1.00 Cash Flows pº 3.896 .456 .312 .308 .174 .215 .149 .104 .099 .057 .033 .208 .097 .046 .022 .011 4.364 4.887 14% 1.140 1.300 1.482 1.689 1.925 2.195 2.502 2.853 4.661 6.728 9.646 13.743 3.252 3.707 4.226 4.818 5.492 6.261 7.138 3.243 5.744 10.063 4.801 10.286 21.725 45.260 93.051 188.880 1,469.800 .962 .943 .926 .909 .893 .877 .862 .847 .833 .925 .890 .857 .826 .797 .769 .743 .718 .694 .840 .794 .751 .712 .675 .641 .609 .579 .792 .735 .683 .636 .592 .552 .516 .482 .681 .621 .567 .519 .476 .437 .402 .889 .855 .822 .747 .650 .527 .429 .350 .287 .237 .195 .162 .135 .625 .497 .397 .319 .257 .208 .168 .137 .112 .601 .469 .368 .290 .229 .182 .145 .116 .093 .577 .442 .340 .263 .205 .160 .125 .099 .078 555 .417 315 .239 .183 .140 .108 .084 .065 20% 1.200 T 1.440 1.728 2.074 2.488 2.986 1 (1 + r) 3.583 4.300 17.450 29.960 50.950 237.380 5.160 6.192 7.430 8.916 10.699 12.839 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 15.407 38.338 (1 + r)" - 1 14% 20% 1.000 1.000 2.140 2.220 3.440 3.640 4.921 5.368 6.610 7.442 8.536 9.930 10.730 12.916 13.233 16.499 16.085 20.799 19.337 25.959 23.045 32.150 27.271 39.580 32.089 48.497 37.581 59.196 43.842 72.035 91.025 186.690 356.790 1,181.900 767.090 1.342.000 7.343.900 .085 .073 .062 .790 .705 .630 .564 .507 .456 .410 .370 .335 .303 .275 .250 .227 .207 .189 .760 .665 .583 .513 .452 .400 .354 .314 .279 .249 .222 .198 .178 .159 .143 .731 .627 540 .467 .404 .351 .305 .266 .233 .204 .179 .157 .139 .123 .108 .703 .592 .500 .424 .361 .308 .263 .225 .194 .167 .144 .125 .108 .094 .082 .676 .558 .463 .386 .322 .270 .227 .191 .162 .137 .116 .099 .112 .094 .079 .066 .056 .047 .092 .076 .062 .052 .043 .036 .075 .061 .050 .040 .033 .027 .049 .039 .032 .025 .021 .040 .031 .025 .020 .016 .062 .051 .073 .051 .037 .026 .019 .014 .010 .020 .012 .007 .004 .003 .002 .001 .005 .003 .001 .001 0.962 0.943 0.926 1.886 1.833 10% 12% 14% 16% 0.909 0.893 0.877 0.862 0.847 1.783 1.736 1.690 1.647 1.605 1.566 2.775 2.673 2.577 2.487 2.402 2.322 2.246 2.174 3.630 3.465 3.312 3.170 3.037 2.914 2.798 2.690 4.452 4.212 3.993 3.791 3.605 3.433 3.274 3.127 .820 .806 .794 .672 .650 .630 551 .524 .500 .477 455 .451 .423 .397 .373 .350 .370 .341 .315 .291 .269 28% 30% 32% .781 .769 .758 .610 .592 .574 435 .329 .250 5.242 4.917 6.002 5.582 5.206 6.733 6.210 5.747 5.335 4.968 4.639 4.344 4.078 5.328 4.946 4.607 4.303 5.650 5.216 4.833 4.494 7.435 6.802 6.247 5.759 8.111 7.360 6.710 6.145 18% 20% 22% 24% .007 .005 .001 25% 26% 28% 0.833 0.820 0.806 0.800 0.794 0.781 0.769 1.528 1.492 1.457 1.440 1.424 1.392 1.361 2.106 2.042 1.981 1.952 1.923 1.868 1.816 2.589 2.494 2.404 2.362 2.320 2.241 2.166 2.991 2.864 2.745 2.689 2.635 2.532 2.436 13.590 11.470 9.818 8.514 7.469 6.623 5.929 5.353 4.870 4.460 17.292 13.765 11.258 9.427 8.055 7.003 6.177 5.517 4.979 4.534 19.793 15.046 11.925 9.779 8.244 7.105 6.234 5.548 4.997 4.544 .004 4.623 4.355 4.111 3.889 3.685 3.498 3.326 3.167 3.020 2.951 2.885 2.759 2.643 4.868 4.564 4.288 4.039 3.812 3.605 3.416 3.242 3.161 3.083 2.937 2.802 3.837 3.619 3.421 3.329 3.241 3.076 2.925 4.031 3.786 3.566 3.463 3.366 3.184 3.019 4.192 3.923 3.682 3.571 3.465 3.269 3.092 30% 8.760 7.887 7.139 6.495 9.385 8.384 7.536 6.814 6.194 5.660 5.197 4.793 5.938 5.453 5.029 4.656 4.327 4.035 3.776 3.656 3.544 3.335 3.147 4.439 4.127 3.851 3.725 3.606 3.387 3.190 9.986 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 4.203 3.912 3.780 3.656 3.427 3.223 8.244 7.367 6.628 6.002 5.468 5.008 4.611 4.265 3.962 3.824 3.695 3.459 3.249 8.559 7.606 6.811 6.142 5.575 5.092 4.675 4.315 4.001 3.859 3.726 3.483 3.268 10.563 9.295 11.118 9.712 4.110 3.954 3.808 3.546 3.316 4.160 3.995 3.842 3.569 3.332 4.166 3.999 3.846 3.571 3.333
Transcribed Image Text:Future Value and Present Value Tables Table I Future Value of $1.00(1+r)^ Period 4% 1 1 2 3 + in 4 5 6 7 8 9 10 11 12 13 14 15 2 20 30 40 3 4 5 6 7 10 8 9 12 13 11 14 15 20 30 6 7 8 9 10 40 11 12 13 14 15 20 30 40 Period 4% 1 1.000 2 2.040 3 3.122 4 4.247 5 5.416 6 6.633 7 7.898 8 9.214 9 10.583 10 12.006 11 13.486 12 15.026 16.627 13 14 18.292 15 20.024 20 30 40 1.125 Table IV 1.040 1.060 1.080 1.082 1.124 1.170 1.217 1.265 1.316 1.369 1.423 1.480 Table III Present Value of $1.00 1.540 Period 4% 6% 6% 1.601 1.665 2.133 1.732 2.261 1.801 1.263 1.254 1.405 1.361 1.464 1.574 1.338 1.469 1.611 1.762 1.419 1.587 1.504 1.714 1.594 1.851 1.166 1.210 1.191 1.260 1.331 2.191 3.207 1.898 2.332 2.012 Period 4% 1 2 3 4 5 8% 1.690 1.999 2.359 1.791 2.159 2.594 6% 1.000 2.060 3.184 4.375 5.637 6.975 8.394 9.898 11.491 13.181 10% 12% 1.100 1.120 14.972 16.870 1.772 1.949 2.144 1 (1 + r)" 2.518 3.139 2.853 2.720 3.452 2.937 2.397 3.172 4.177 5.474 3.798 6% 1.974 8% 10% 12% 1.000 1.000 1.000 2.080 2.100 2.120 3.246 3.310 3.374 4.506 4.641 4.779 5.867 6.105 6.353 7.336 7.716 8.115 8.923 9.487 10.089 10.637 11.436 12.300 12.488 13.580 14.776 14.487 15.938 17.549 16.646 18.531 20.655 18.977 21.385 24.133 18.882 21.495 24.523 28.029 24.215 27.976 32.393 21.015 23.276 27.152 31.773 37.280 36.778 45.762 57.276 75.052 29.778 56.085 79.058 113.283 164.496 241.330 95.026 154.762 259.057 442.597 2.211 2.476 Table II Future Value of a Series of $1.00 Cash Flows (Ordinary Annuity) 8% 2.773 3.106 3.479 1 Present Value of Series of $1.00 Cash Flows pº 3.896 .456 .312 .308 .174 .215 .149 .104 .099 .057 .033 .208 .097 .046 .022 .011 4.364 4.887 14% 1.140 1.300 1.482 1.689 1.925 2.195 2.502 2.853 4.661 6.728 9.646 13.743 3.252 3.707 4.226 4.818 5.492 6.261 7.138 3.243 5.744 10.063 4.801 10.286 21.725 45.260 93.051 188.880 1,469.800 .962 .943 .926 .909 .893 .877 .862 .847 .833 .925 .890 .857 .826 .797 .769 .743 .718 .694 .840 .794 .751 .712 .675 .641 .609 .579 .792 .735 .683 .636 .592 .552 .516 .482 .681 .621 .567 .519 .476 .437 .402 .889 .855 .822 .747 .650 .527 .429 .350 .287 .237 .195 .162 .135 .625 .497 .397 .319 .257 .208 .168 .137 .112 .601 .469 .368 .290 .229 .182 .145 .116 .093 .577 .442 .340 .263 .205 .160 .125 .099 .078 555 .417 315 .239 .183 .140 .108 .084 .065 20% 1.200 T 1.440 1.728 2.074 2.488 2.986 1 (1 + r) 3.583 4.300 17.450 29.960 50.950 237.380 5.160 6.192 7.430 8.916 10.699 12.839 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 15.407 38.338 (1 + r)" - 1 14% 20% 1.000 1.000 2.140 2.220 3.440 3.640 4.921 5.368 6.610 7.442 8.536 9.930 10.730 12.916 13.233 16.499 16.085 20.799 19.337 25.959 23.045 32.150 27.271 39.580 32.089 48.497 37.581 59.196 43.842 72.035 91.025 186.690 356.790 1,181.900 767.090 1.342.000 7.343.900 .085 .073 .062 .790 .705 .630 .564 .507 .456 .410 .370 .335 .303 .275 .250 .227 .207 .189 .760 .665 .583 .513 .452 .400 .354 .314 .279 .249 .222 .198 .178 .159 .143 .731 .627 540 .467 .404 .351 .305 .266 .233 .204 .179 .157 .139 .123 .108 .703 .592 .500 .424 .361 .308 .263 .225 .194 .167 .144 .125 .108 .094 .082 .676 .558 .463 .386 .322 .270 .227 .191 .162 .137 .116 .099 .112 .094 .079 .066 .056 .047 .092 .076 .062 .052 .043 .036 .075 .061 .050 .040 .033 .027 .049 .039 .032 .025 .021 .040 .031 .025 .020 .016 .062 .051 .073 .051 .037 .026 .019 .014 .010 .020 .012 .007 .004 .003 .002 .001 .005 .003 .001 .001 0.962 0.943 0.926 1.886 1.833 10% 12% 14% 16% 0.909 0.893 0.877 0.862 0.847 1.783 1.736 1.690 1.647 1.605 1.566 2.775 2.673 2.577 2.487 2.402 2.322 2.246 2.174 3.630 3.465 3.312 3.170 3.037 2.914 2.798 2.690 4.452 4.212 3.993 3.791 3.605 3.433 3.274 3.127 .820 .806 .794 .672 .650 .630 551 .524 .500 .477 455 .451 .423 .397 .373 .350 .370 .341 .315 .291 .269 28% 30% 32% .781 .769 .758 .610 .592 .574 435 .329 .250 5.242 4.917 6.002 5.582 5.206 6.733 6.210 5.747 5.335 4.968 4.639 4.344 4.078 5.328 4.946 4.607 4.303 5.650 5.216 4.833 4.494 7.435 6.802 6.247 5.759 8.111 7.360 6.710 6.145 18% 20% 22% 24% .007 .005 .001 25% 26% 28% 0.833 0.820 0.806 0.800 0.794 0.781 0.769 1.528 1.492 1.457 1.440 1.424 1.392 1.361 2.106 2.042 1.981 1.952 1.923 1.868 1.816 2.589 2.494 2.404 2.362 2.320 2.241 2.166 2.991 2.864 2.745 2.689 2.635 2.532 2.436 13.590 11.470 9.818 8.514 7.469 6.623 5.929 5.353 4.870 4.460 17.292 13.765 11.258 9.427 8.055 7.003 6.177 5.517 4.979 4.534 19.793 15.046 11.925 9.779 8.244 7.105 6.234 5.548 4.997 4.544 .004 4.623 4.355 4.111 3.889 3.685 3.498 3.326 3.167 3.020 2.951 2.885 2.759 2.643 4.868 4.564 4.288 4.039 3.812 3.605 3.416 3.242 3.161 3.083 2.937 2.802 3.837 3.619 3.421 3.329 3.241 3.076 2.925 4.031 3.786 3.566 3.463 3.366 3.184 3.019 4.192 3.923 3.682 3.571 3.465 3.269 3.092 30% 8.760 7.887 7.139 6.495 9.385 8.384 7.536 6.814 6.194 5.660 5.197 4.793 5.938 5.453 5.029 4.656 4.327 4.035 3.776 3.656 3.544 3.335 3.147 4.439 4.127 3.851 3.725 3.606 3.387 3.190 9.986 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 4.203 3.912 3.780 3.656 3.427 3.223 8.244 7.367 6.628 6.002 5.468 5.008 4.611 4.265 3.962 3.824 3.695 3.459 3.249 8.559 7.606 6.811 6.142 5.575 5.092 4.675 4.315 4.001 3.859 3.726 3.483 3.268 10.563 9.295 11.118 9.712 4.110 3.954 3.808 3.546 3.316 4.160 3.995 3.842 3.569 3.332 4.166 3.999 3.846 3.571 3.333
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