Exercise 12-7 Your answer is incorrect. Try again. ggy Company is considering th

Question

Exercise 12-7 Your answer is incorrect. Try again. ggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual Life of Project Investment Income Project 22A $241,900 $17,500 6 years 270,900 20,780 9 years 24A 282,000 15,700 7 years 23A 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. lggy Company uses the straight-line method of depreciation. Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 10. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal Rate of Return Project 22A 19.65 23A 6.83 24A 19.21 If iggy Company's required rate of return is 11%, which projects are acceptable? 24A The tollowing project(s) are acceptable LINK TO TEXT

Explanation / Answer

Project 22 A: Annual cash flows=17500+(241900/6)= $57817 PV factor for internal rate of return =241900/57817= 4.18389 Internal rate of return = 11% Project 23 A: Annual cash flows=20780+(270900/9)= $50880 PV factor for internal rate of return = 270900/50880= 5.32429 Internal rate of return = 12% Project 24 A: Annual cash flows=15700+(282000/7)= $55986 PV factor for internal rate of return = 282000/55986= 5.03697 Internal rate of return = 9% Project 22A and 23A are acceptable

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