Wayne Company is considering a long-term investment project called ZIP. ZIP wil

Question

Wayne Company is considering a long-term investment project called ZIP. ZIP wil require an investment $123,600. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase b $86,400, and annual cash outflows would increase by $45,200. The company's required rate of return is 12%. Click here to view PV table. Calculate the internal rate of return on this project. (Round answers to 0 decimal places, eg, 15% Internal rate of return on this project is between Determine whether this project should be accepted? The project 96 and be accepted.

Explanation / Answer

Net annual cash flows = 86400-45200= $41200 PV factor for Internal rate of return = 123600/41200= 3 Internal rate of return is between 12% and 13% The project should be accepted Note: The actual internal rate of return is 12.59%

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