Exercise 24-7

Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.

Project	Investment	Annual Income	Life of Project
22A	$240,400		$16,700		6 years
23A	273,200		20,740		9 years
24A	281,300		15,700		7 years

Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation.

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(a)

Determine the internal rate of return for each project.(Round answers 0 decimal places, e.g. 10. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Project	Internal Rate of Return
22A	%
23A	%
24A	%

(b)

If Iggy Company?s required rate of return is 11%, which projects are acceptable?

The following project(s) are acceptable

Please see if you can give me the correct answer.I have gotten the wrong answer before

able4Present Value of an Annuity of 1 (n) 5% 6% 7% 8% Payme 4% nts 1 .96154 .95238 .94340 .93458 .92593 2 1.8860 1.8594 1.8333 1.8080 1.7833 9 1 9 2 3 2.7750 2.7232 2.6730 2.6243 2.5771 9 5 1 2 4 3.6299 3.5459 3.4651 3.3872 3.3121 0 5 1 1 5 4.4518 4.3294 4.2123 4.1002 3.9927 2 8 6 0 6 5.2421 5.0756 4.9173 4.7665 4.6229 4 9 2 4 7 6.0020 5.7863 5.5823 5.3892 5.2064 5 7 8 9 8 6.7327 6.4632 6.2097 5.9713 5.7466 4 1 9 0 9 7.4353 7.1078 6.8016 6.5152 6.2469 3 2 9 3 10 8.1109 7.7217 7.3600 7.0235 6.7101 0 3 9 8 11 8.7604 8.3064 7.8868 7.4986 7.139 8 1 7 7 12 9.3850 8.8632 8.3838 7.9426 7.5361 7 5 4 9 13 9.9856 9.3935 8.8526 8.3576 7.9038 5 7 8 5 14 10.563 9.8986 9.2949 8.7454 8.2442 4 8 7 15 11.118 10.38 9.7122 9.1079 8.5595 5 1 16 11.652 10.838 10.106 9.4466 8.8514 5 17 12.166 11.274 10.477 9.7632 9.1216 18 12.659 11.69 10.828 10.059 9.3719 19 13.134 12.085 11.158 10.336 9.6036 20 13.59 12.462 11.47 10.594 9.8182 Table3Present Value of 1 (n) 5% 6% Period 4% s 1 0.9615 0.9524 0.9434 2 0.9246 0.907 0.89 3 0.889 0.8638 0.8396 4 0.8548 0.8227 0.7921 5 0.8219 0.7835 0.7473 6 0.7903 0.7462 0.705 7 0.7599 0.7107 0.6651 8 0.7307 0.6768 0.6274 9 0.7026 0.6446 0.5919 10 0.6756 0.6139 0.5584 11 0.6496 0.5847 0.5268 12 0.6246 0.5568 0.497 13 0.6006 0.5303 0.4688 9% 10% 11% 12% .91743 1.7591 2.5313 3.2397 3.8897 4.4859 5.033 5.5348 5.9953 6.4177 6.8052 7.1607 7.4869 7.7862 8.0607 8.3126 8.5436 8.7556 8.9501 9.1286 .90909 1.7355 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.759 6.1446 6.4951 6.8137 7.1034 7.3667 7.6061 7.8237 8.0216 8.2014 8.3649 8.5136 .90090 1.7125 2.4437 3.1025 3.6959 4.2305 4.7122 5.1461 5.5371 5.8892 6.2065 6.4924 6.7499 6.9819 7.1909 7.3792 7.5488 7.7016 7.8393 7.9633 .89286 1.6901 2.4018 3.0374 3.6048 4.1114 4.5638 4.9676 5.3283 5.6502 5.9377 6.1944 6.4236 6.6282 6.8109 6.974 7.1196 7.2497 7.3658 7.4694 7% 8% 9% 10% 11% 12% 0.9346 0.8734 0.8163 0.7629 0.713 0.6663 0.6228 0.582 0.5439 0.5084 0.4751 0.444 0.415 0.9259 0.8573 0.7938 0.735 0.6806 0.6302 0.5835 0.5403 0.5003 0.4632 0.4289 0.3971 0.3677 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963 0.547 0.5019 0.4604 0.4224 0.3875 0.3555 0.3262 0.9091 0.8265 0.7513 0.683 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 0.3505 0.3186 0.2897 0.9009 0.8116 0.7312 0.6587 0.5935 0.5346 0.4817 0.4339 0.3909 0.3522 0.3173 0.2858 0.2575 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066 0.4524 0.4039 0.3606 0.322 0.2875 0.2567 0.2292 14 15 16 17 18 19 20 When using Table 3, the future value is multiplie d by the present value factor specified at the intersecti on of the number of periods and the discount rate. 0.5775 0.5553 0.5339 0.5134 0.4936 0.4746 0.4564 0.5051 0.481 0.4581 0.4363 0.4155 0.3957 0.3769 0.4423 0.4173 0.3937 0.3714 0.3503 0.3305 0.3118 0.3878 0.3625 0.3387 0.3166 0.2959 0.2762 0.2584 0.3405 0.3152 0.2919 0.2703 0.2503 0.2317 0.2146 0.2993 0.2745 0.2519 0.2311 0.212 0.1945 0.1784 0.2633 0.2394 0.2176 0.1979 0.1799 0.1635 0.1486 0.232 0.209 0.1883 0.1696 0.1528 0.1377 0.124 0.2046 0.1827 0.1631 0.1456 0.13 0.1161 0.1037 15% .86957 1.6257 2.2832 2.855 3.3522 3.7845 4.1604 4.4873 4.7716 5.0188 5.2337 5.4206 5.5832 5.7245 5.8474 5.9542 6.0472 6.128 6.1982 6.2593 15% 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472 0.2149 0.1869 0.1625 0.1413 0.1229 0.1069 0.0929 0.0808 0.0703 0.0611