The boston culinary institute is evaluating a classroom

Reference no: EM13483977

The Boston Culinary Institute is evaluating a classroom remodeling project. The cost of the remodel will be $350,000 and will be depreciated over 6 years using the straight-line method. The remodeled room will accomodate 5 extra students per year. Each student pays annual tuition of $22,000. The before-tax incremental cost of a student (e.g., the cost of food prepared and consumed by a student) is $2,000 per year. The company's tax rate is 40% and the company requires a 12% rate of return on the remodeling project.

Required:

Assuming a 6-year time horizon, what is the internal rate of return of the remodeling project? Should the company invest in the remodel?

Reference no: EM13483977

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