Reference no: EM131803401
Question - 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 Company's required rate of return is 11%, which projects are acceptable?
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