Question
Initial Year Year 1 Year 2 Year 3 Year 4 Investment A (400,000.00) 126,000.00 126,000.00 126,000.00 126,000.00 Investment B (160,000.00) 52,800.00 52,800.00 52,800.00 52,800.00 Required
Initial Year Year 1 Year 2 Year 3 Year 4 Investment A (400,000.00) 126,000.00 126,000.00 126,000.00 126,000.00 Investment B (160,000.00) 52,800.00 52,800.00 52,800.00 52,800.00 Required Return 8% Investment A NPV $17,327.98 IRR 10% Investment B NPV $14,880.30 IRR 12%
| Initial Year | Year 1 | Year 2 | Year 3 | Year 4 | |
| Investment A | (400,000.00) | 126,000.00 | 126,000.00 | 126,000.00 | 126,000.00 |
| Investment B | (160,000.00) | 52,800.00 | 52,800.00 | 52,800.00 | 52,800.00 |
| Required Return | 8% | ||||
| Investment A | |||||
| NPV | $17,327.98 | ||||
| IRR | 10% | ||||
| Investment B | |||||
| NPV | $14,880.30 | ||||
| IRR | 12% | ||||
Analyze the results of the internal rate of return calculation and the significance of these results, supported with examples. Determine which project should be adopted based on the internal rate of return approach and provide rationale for your decision.
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Accounting Principles Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
8th Canadian Edition
1119502551, 1-119-50255-5, 978-1119502555
