Answered: termine the internal rate of return for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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

Project	Investment	Annual Income	Life of Project
22A	$243,600	$17,130	6 years
23A	271,500	20,700	9 years
24A	280,600	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.

(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	%
23A	%
24A	%

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

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