Open Show Work Ueker Company is considering three capital expenditure projects.
ID: 2380798 • Letter: O
Question
Open Show Work Ueker Company is considering three capital expenditure projects. Relevant data for the projects are as follows.Project
Investment
Annual
Income
Life of
Project
22A
$240,940 $17,320 6 years 23A
272,770 20,870 9 years 24A
280,360 18,410 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. Ueker Company uses the straight-line method of depreciation. (Refer the below table)
Ueker Company is considering three capital expenditure projects. Relevant data for the projects are as follows. 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. Ueker Company uses the straight-line method of depreciation. (Refer the below table)
Explanation / Answer
At IRR,
P.V OF OUTFLOW = P.V. OF INFLOW
Where, PV OF INFLOW = C1/(1+R) + C1/(1+R)^2 + C1/(1+R)^3+
At IRR,
P.V OF OUTFLOW = P.V. OF INFLOW
Where, PV OF INFLOW = C1/(1+R) + C1/(1+R)^2 + C1/(1+R)^3+
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