Question

Assignment Assignment > Open Assignment PRINTER VERSION BACK NEXT Salarian Company is considering two capital expenditures. Relevant data for the projects are as follows: ASSIGNMENT RESOURCES ACC212 Lab #9 Brief Exercise 13.1 Exercise 13.16 WileyPLUS Problem 13-7 a-b Brief Exercise 13.6 WileyPLUS Problem 13-4 a-b Project Initial investment Annual income Life of project Salvage value $242,188 $48,120 7 years $0 в $215,827 $41,940 8 years $0 Salarian Company uses the straight-line method to depreciate its assets. Review Score Review Results by Study Objective Calculate the internal rate of return for each project. (For calculation purposes, use 4 decimal places as displayed in the factor table provided, e.g. 1.2512. Round answers to 0 decimal places, e.g. 15%.) Click here to view PV table. Internal rate of return Project A Project B LINK TO TEXT Determine whether the projects are acceptable if the required rate of return is 10%. License Agreement | Privacy Policy | © 2000-2019 John Wiley & Sons, Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc. Version 4.24.17.1

Answer 1

		IRR
Project A	=	28%
Project B	=	27%
Yes, The projects give IRR of more than 10%
Computation of IRR of Project:
Project A
Annual cash Inflow	=	Depreciation + Annual Income
	=	($242188/7 years) + $48120
	=	$         82,718
	Year	Value Flows
	0	$   -2,42,188
	1	$         82,718
	2	$         82,718
	3	$         82,718
	4	$         82,718
	5	$         82,718
	6	$         82,718
	7	$         82,718
IRR	=	28%
Project B
Annual cash Inflow	=	Depreciation + Annual Income
	=	($215827/8 years) + $41940
	=	$         68,918
	Year	Value Flows
	0	$   -2,15,827
	1	$         68,918
	2	$         68,918
	3	$         68,918
	4	$         68,918
	5	$         68,918
	6	$         68,918
	7	$         68,918
	8	$         68,918
IRR	=	27%