40. BP Company is considering two capital investment proposals.
Estimates regarding each project are provided below:
Project LS1
Project RS1
Initial investment
P2000,000
P300,000
Annual net income
10,000
21,000
Net annual cash inflow
50,000
71,000
Estimated useful life
5 years
6 years
Salvage value
-0-
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
Period
9%
10%
11%
12%
5
3.890
3.791
3.696
3.605
6
4.486
4.355
4.231
4.111
The internal rate of return for Project RS1 is closest to?
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