Question
Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Project Investment Annual Income Life of Project 22A $244,500
Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Project | Investment | Annual Income | Life of Project | ||||
---|---|---|---|---|---|---|---|
22A | $244,500 | $17,490 | 6 years | ||||
23A | 274,400 | 20,770 | 9 years | ||||
24A | 282,900 | 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. Click here to view PV table. (a) Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Project | Internal Rate of Return | ||
---|---|---|---|
22A | enter percentages rounded to 0 decimal places % | ||
23A | enter percentages rounded to 0 decimal places % | ||
24A | enter percentages rounded to 0 decimal places % |
(b) If Iggy Companys required rate of return is 11%, which projects are acceptable?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started