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

ProjectInvestmentAnnual

IncomeLife of Project22A$240,000$15,5006 years23A270,00020,6009 years24A280,00015,7007 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.

Instructions

1. Determine the internal rate of return for each project. Round the internal rate of return factor to three decimals.
2. If Iggy Company's required rate of return is 10%, which projects are acceptable?

Calculate annual rate of return.