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Unformatted text preview: Exercise 1 Summer Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Project Investment Annual Income Life of Project 22A $240,000 $15,000 6 years 23A 270,000 24,400 9 years 24A 280,000 21,000 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. Summer Company uses the straight-line method of depreciation. Instructions (a) Determine the internal rate of return for each project. Round the internal rate of return factor to three decimals. (b) If Summer Companys required rate of return is 11%, which projects are acceptable? For 1RR:Please go through the file Since the required rate is 11% ,and project 23A and 24A are having IRR 14% and 12% repectively , so these two projects can be accepted. From the above anlysis 24A and 23A is the correct aswer ,these two are only giving positive NPV,And these two can be accepted under NPV rule ....
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This note was uploaded on 02/12/2012 for the course FIN 200 200 taught by Professor Markempasis during the Spring '09 term at University of Phoenix.
- Spring '09