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Exercise 2611 Iggy Company is considering three capital expenditure projects Relevant data for the projects are as follows Project Investment Annual Income Life of Project

Exercise 26-11 Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Project Investment Annual Income Life of Project 22A $242,100 $17,560 6 years 23A 271,300 20,630 9 years 24A 283,800 15,700 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. Iggy Company uses the straight-line method of depreciation.

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(a)

Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 10. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Project   Internal Rate of
Return
 
22A  

%
 
23A  

%
 
24A  

%
 


(b)

If Iggy Company’s required rate of return is 11%, which projects are acceptable?

The following project(s) are acceptable

 22A22A and 23A22A, 23A and 24A22A and 24A23A24A23A and 24A

 

Apr 08 2020 View more View Less

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