What is the irr of the new menu item project

Assignment Help Financial Accounting
Reference no: EM132939833

Problem 1: A fast food restaurant is considering the addition of a new menu item. Introduction of the new menu item would require an initial investment of $874,200, and the project is projected to produce $300,000 of after-tax cash flows for each of the next four years. The fast food restaurant has a weighted average cost of capital of 15% and makes project investment decisions on the basis of internal rate of return (IRR). What is the IRR of the new menu item project, and should the fast food restaurant accept or reject the project?

Option 1: 37%, accept the project

Option 2: 9%, reject the project

Option 3: 19%, accept the project

Option 4: 14%, reject the project

Reference no: EM132939833

Questions Cloud

What will be the required return of ABC : ABC Corp's beta is 1.4, risk-free rate is 3%, and the market return is 9%. If the risk-free rate increases to 5%, what will be the required return of ABC
What would be the journal entry to record depletion : In the first year, 50,000 tons of ore are extracted and sold. What would be the journal entry to record depletion for the first year.
What is the redistribution of cost allocated : If the sale value of the byproduct is applied as cost to the byproduct, what is the redistribution of Cost allocated to P1 & P2 using NRV
Which project should the company accept : Project B and Project C both have the same net present value, although Project C is much riskier than Project B. Which project should the company accept?
What is the irr of the new menu item project : What is the IRR of the new menu item project, and should the fast food restaurant accept or reject the project? A fast food restaurant is considering.
Find what is the value of walton the stock : 0.25 this year, 0.11, next year, and 0.08 for every year after that. If Walton has a required rate of return of 0.14, what is the value of Walton's the stock?
What the amounts to be recorded for the building : Wong will invest P500,000 cash. For the partnership, what the amounts to be recorded for the building and for Chua's Capital account
Which of the conclusions is correct for norris inc : Norris Inc. calculated the net present value for a potential investment project, which is estimated to yield. Which of the following conclusions is correct?
What is Art hourly rate of pay : Art receives a semi-monthly salary of $837.27 and works a regular workweek of 37.5 hours. What is Art's hourly rate of pay

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the cash flow from financing for the year ended dec

The lease term is eight years, the fair value of the asset is $650,000,What is the cash flow from financing for the year ended December 31, 20X1?

  Compute the bond issue price as a percentage of face value

Compute the bond issue price. Prepare the required journal entries that Abbott must make for the years 2020 through 2023 to record the interest payments.

  How much was new company net income or net loss

Assume that new Towne Company reported the following summarized data at September 30, 2016. Accounts appear in no particular order; dollar amounts are in millions.  Prepare the trial balance of New Towne at September 30, 2016. List the accounts in th..

  Identifying the relavant costs from the given dataa number

identifying the relavant costs from the given data.a number of costs are listed below that may be relevant in decisions

  Determine the amount of dividends payable

Determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions

  Compute the revenue and gross profit

On June 15, 2016, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $220 million. The expected completion date is April 1, 2018, just in time for the 2018 baseball season. Compu..

  Explain the equity method of accounting

Montego Limited bought 30% of the Ordinary shares in Negril Limited on 1 April 2018 at a price of $3.10 per share. Explain the equity method of accounting

  What was JetBlue equity at the end of the year

During the year, assets increased $486 million and liabilities increased $241 million. What was JetBlue's equity at the end of the year?

  Prepare in proper form a post-closing trial balance

Question - From the following accounts, prepare in proper form a post-closing trial balance for Ahearn Company on December 31, 2004

  Evaluate the new breakeven point in trades

Use the income statement equation approach to evaluate the dollar revenues needed to earn a target monthly operating income of $12,600. Evaluate the new breakeven point in trades. How does this affect the breakeven point?

  Find the present value due in five years

Find the present value of $500 due in five years under each of the 12 percent simple rate, compounded semiannually and 12 percent simple rate, compounded annual

  Prepare the year end adjusting entry for uncollectible

Warner Company’s year-end unadjusted trial balance shows accounts receivable of $99,000, allowance for doubtful accounts of $600 (credit), and sales of $280,000. Uncollectible are estimated to be 1.5% of accounts receivable. Prepare the December 31 y..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd