Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 12, Problem 12.7E
Iggy 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. Iggy Company uses the straight-line method of depreciation.
Instructions
(a) Determine the
(b) If Iggy Company's required rate of return is 10%. which projects are acceptable?
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Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Project
Investment
AnnualIncome
Life ofProject
22A
$243,600
$17,130
6Â years
23A
271,500
20,700
9Â years
24A
280,600
15,700
7Â 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.(a) Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Project
Internal Rate ofReturn
22A
 %
23A
 %
24A
 %
If Iggy Company’s required rate of return is 11%, which projects are acceptable?
Bridgeport Company is considering two capital expenditures. Relevant data for the projects are as follows:
Project
Initial investment
Annual cash inflow
Life of project
Salvage value
A
$260,084
$46,590
Project A
7 years
$0
Project B
Click here to view the factor table.
Bridgeport Company uses the straight-line method to depreciate its assets.
B
$278,237
Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the factor table
provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.)
$44,540
9 years
$0
Internal rate of return
%
%
Oriole Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Annual
Project Investment Income
22A
$242,100 $17,560
271,300
283,800
23A
24A
(a)
Annual net income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project.
Oriole Company uses the straight-line method of depreciation.
Click here to view the factor table.
Project
20,630
22A
15,700
Determine the internal rate of return for each project. (Round answers to 0 decimal places, e.g. 13%. For calculation purposes, use 5
decimal places as displayed in the factor table provided.)
23A
24A
Internal Rate of
Return
%
The following project(s) are acceptable
Life of
Project
6 years
9 years
7 years
%
%
(b)
If Oriole Company's required rate of return is 11%, which projects are acceptable?
Chapter 12 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Tom Wells claims the formula for the cash payback...Ch. 12 - Prob. 4QCh. 12 - What is the decision rule under the net present...Ch. 12 - Discuss the factors that determine the appropriate...Ch. 12 - What simplifying assumptions were made in the...Ch. 12 - What are some examples of potential intangible...Ch. 12 - What steps can be taken to incorporate intangible...Ch. 12 - Prob. 10Q
Ch. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - What are the strengths of the annual rate of...Ch. 12 - Prob. 15QCh. 12 - Prob. 16QCh. 12 - Prob. 12.1BECh. 12 - Hsung Company accumulates the following data...Ch. 12 - Thunder Corporation, an amusement park, is...Ch. 12 - Caine Bottling Corporation is considering the...Ch. 12 - McKnight Company is considering two different,...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.1DICh. 12 - Prob. 12.2DICh. 12 - Prob. 12.3DICh. 12 - Prob. 12.4DICh. 12 - Prob. 12.5DICh. 12 - Prob. 12.1ECh. 12 - Doug's Custom Construction Company is considering...Ch. 12 - Prob. 12.3ECh. 12 - BAK Corp. is considering purchasing one of two new...Ch. 12 - Bruno Corporation is involved in the business of...Ch. 12 - BSU Inc. wants to purchase a new machine for...Ch. 12 - Iggy Company is considering three capital...Ch. 12 - Prob. 12.8ECh. 12 - Legend Service Center just purchased an automobile...Ch. 12 - Vilas Company is considering a capital investment...Ch. 12 - Drake Corporation is reviewing an investment...Ch. 12 - U3 Company is considering three long-term capital...Ch. 12 - Prob. 12.2APCh. 12 - Brooks Clinic is considering investing in new...Ch. 12 - Jane's Auto Care is considering the purchase of a...Ch. 12 - Prob. 12.5APCh. 12 - Prob. 12CDCh. 12 - Luang Company is considering the purchase of a new...Ch. 12 - Prob. 12.2BYPCh. 12 - Tecumseh Products Company has its headquarters in...Ch. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.5BYPCh. 12 - Prob. 12.6BYPCh. 12 - Prob. 12.8BYP
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