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Help P/S Exercise 24-7 Exercise 24-7 Ueker Company is considering three capital

ID: 2473808 • Letter: H

Question

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Exercise 24-7

Exercise 24-7

Ueker Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Project Investment Annual
Income Life of
Project 22A $240,380 $17,300 6 years 23A 270,300 20,810 9 years 24A 283,500 18,380 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.

Click here to view the factor table.

(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Explanation / Answer

Depreciation ::

22 A= $240,380/6=$40,063

Annual Cash flow =$40,063+17,300=$57,363

22A

Year

CashFlow

0

          (240,380)

1

               57,363

2

               57,363

3

               57,363

4

               57,363

5

               57,363

6

               57,363

IRR

11.33%

Depreciation ::

23 A= $270,300/9=$30,033

Annual Cash flow =$30,033+20,810=$50,843

23A

Year

CashFlow

0

          (270,300)

1

               50,843

2

               50,843

3

               50,843

4

               50,843

5

               50,843

6

               50,843

7

               50,843

8

               50,843

9

               50,843

IRR

12.06%

Depreciation ::

24 A= $283,500/7=$40,500

Annual Cash flow =$40,500+18,380=$58,880

24A

Year

CashFlow

0

          (283,500)

1

               58,880

2

               58,880

3

               58,880

4

               58,880

5

               58,880

6

               58,880

7

               58,880

IRR

10.34%

22A

Year

CashFlow

0

          (240,380)

1

               57,363

2

               57,363

3

               57,363

4

               57,363

5

               57,363

6

               57,363

IRR

11.33%