Exercise 26-7 Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
| Project |
Investment |
Annual
Income |
Life of
Project |
| 22A |
$240,400 |
|
$16,700 |
|
6 years |
|
| 23A |
273,200 |
|
20,740 |
|
9 years |
|
| 24A |
281,300 |
|
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.
Click here to view PV table.
(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?