Ueker Company is considering three capital expenditure projects. Relevant data f

Question

Ueker Company is considering three capital expenditure projects. Relevant data for the projects are as follows. 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. Ueker Company uses the straight-line method of depreciation. Click here to view the factor table. (for calculation purposes, use 5 decimal places as displayed in the factor table provided.) Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 10.) If Ueker Company's required rate of return is 11 percentage, which project(s) are acceptable? The following project(s) are acceptable

Explanation / Answer

project 1 net income depreciation income before depreciation after tax 0 -242330 1 17450 40388.33 57838.33 2 17450 40388.33 57838.33 3 17450 40388.33 57838.33 4 17450 40388.33 57838.33 5 17450 40388.33 57838.33 6 17450 40388.33 57838.33 IRR 11.34% project 2 net income depreciation income before depreciation after tax 0 -270710 1 20710 30078.89 50788.89 2 20710 30078.89 50788.89 3 20710 30078.89 50788.89 4 20710 30078.89 50788.89 5 20710 30078.89 50788.89 6 20710 30078.89 50788.89 7 20710 30078.89 50788.89 8 20710 30078.89 50788.89 9 20710 30078.89 50788.89 IRR 11.99% project 3 net income depreciation income before depreciation after tax 0 -281910 1 17810 40272.86 58082.86 2 17810 40272.86 58082.86 3 17810 40272.86 58082.86 4 17810 40272.86 58082.86 5 17810 40272.86 58082.86 6 17810 40272.86 58082.86 7 17810 40272.86 58082.86 8 9 IRR 10.09% only Project 2 would be selected as its IRR rate if greater than required rate of return of 11%

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