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

ID: 2498325 • Letter: U

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. (Refer the below table)

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%, which projects are acceptable?

Project Investment Annual
Income Life of
Project 22A $240,480 $17,040 6 years 23A 274,290 20,990 9 years 24A 282,090 18,110 7 years

Explanation / Answer

Cash flow

Year

Project 22A

Project 23A

Project 24A

0

$   (240,480)

$                   (274,290)

$           (282,090)

1

$        17,040

$                        20,990

$               18,110

2

$        17,040

$                        20,990

$               18,110

3

$        17,040

$                        20,990

$               18,110

4

$        17,040

$                        20,990

$               18,110

5

$        17,040

$                       20,990

$               18,110

6

$        17,040

$                        20,990

$               18,110

7

$                        20,990

$               18,110

8

$                        20,990

9

$                        20,990

IRR

-20.1%

-6.9%

-16.8%

All projects IRR is negative hence none of the project can be accepted

Cash flow

Year

Project 22A

Project 23A

Project 24A

0

$   (240,480)

$                   (274,290)

$           (282,090)

1

$        17,040

$                        20,990

$               18,110

2

$        17,040

$                        20,990

$               18,110

3

$        17,040

$                        20,990

$               18,110

4

$        17,040

$                        20,990

$               18,110

5

$        17,040

$                       20,990

$               18,110

6

$        17,040

$                        20,990

$               18,110

7

$                        20,990

$               18,110

8

$                        20,990

9

$                        20,990

IRR

-20.1%

-6.9%

-16.8%