Ueker Company is considering three capital expenditure projects. Relevant data f
ID: 2486644 • Letter: U
Question
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.
Determine the internal rate of return for each project.
If Ueker Company's required rate of return is 11%, which projects are acceptable?
The following project(s) are acceptable _______
Project Investment Annual Life of 22A 23A 24A Income Project $241,550 $17,000 6 years 271,870 20,710 9 years 284,140 17,530 7 yearsExplanation / Answer
IRR of Ueker Company - Project 22A = 11.1% Year 0 1 2 3 4 5 6 Total IRR of Ueker Company - Project 23A = 11.94% Year 0 1 2 3 4 5 6 7 8 9 Total IRR of Ueker Company - Project 24A = 9.87% Year 0 1 2 3 4 5 6 7 Total If Ueker company's required rate of return is 11% Project 22A & Project 23A are acceptable since they giving return more than the required rate of 11% (ie. 11.1% & 11.94%)
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