Q8 (10%) (Do It 24-2) Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows would increase by $40,000. The companys required rate of return is 12%. Calculate the internal rate of return on this project and discuss whether it should be accepted.

SOLUTION IRR calculation =

TABLE4 Present Value of an Annuity of 1 Payments 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 6154 95238 94340 93458 92593 91743 90909 90090 89286 86957 188609 185941 1.83339 1.80802 1.78326 1.75911 1.73554 1.71252 1.6900S 16257 .77509 2.72325 2.6730 2.62432 2.57710 253130 248685 2.44371 2.40183 2.28323 62990 3.54595 3.46511 3.38721 331213 323972 3.16986 3.10245 3.03735 2.85498 4.45182 4.32948 4.21236 4.10020 3.99271 3.88965 3.79079 3.69590 3.60478 3.35216 24214 5.075694.917324.76654 4.62288 4.48592435526 423054 4.11141 3.78448 6.00205 5.78637 5.58238 5.38929 5.20637 5.03295 4868424.71220 4.56376 4.16042 .73274 6.46321620979 5.97130 574664 5.53482 5.33493 5.14612 4.96764 44873 43533 7.10782 6.80169 6.51523 624689 5.99525 5.75902 5.53705 5.32825 4.77158 11090 7.72173 7.36009 7.02358 6.71008 641766 6.14457 5.88923 5.65022 5.01877 8.76048 8.30641 7.88687 7.49867 7.13896 6.80519 649506 6.20652 5.93770 5.23371 38507 8.86325 8.38384 7.94269 7.53608 7.16073 681369 6.49236 6.19437 5.42062 9.98565 9.39357 8.85268 8.35765 7.90378 7.48690 7.10336 6.74987 6.42355 558315 10.56312 9.89864 9.29498 8.74547 824424 7.78615 7 36669 6.98187 6.62817 5.72448 1.11839 10.37966 9.71225 9.10791 8.55948 8.06069 7.60608 7.19087 6.81086 5.8473 8 1.65230 10.83777 10.10590 9.44665 8.85137 8.31256 7.82371 7.37916 6.973 12.16567 11.27407 10.477269.76322 9.12164 8 54363 8.02155 7.54879 7.11963 6.04716 2.65930 168959 10.82760 10.05909 9.37189 8.75563 8.20141 7.70162 724967 6.12797 13.13394 12.08532 11.15812 10.33560 960360 8.95012 8.36492 7.83929 7.36578 6.19823 3.5903312.46221 11.46992 10.59401 981815 9.12855 8.51356 7.96333 7 46944 6 25933