Response to the following :
Refer to problem. Compute the internal rate of return of each project, and use this information to identify the better investment.
Problem:
Chapter (Present-Value Concepts). Use the net present value method to determine whether Salon Products should invest in the following projects:
• Project A: Costs $272,000 and offers eight annual net cash inflows of $60,000. Salon Products requires an annual return of 14% on projects like A.
• Project B: Costs $380,000 and offers nine annual net cash inflows of $70,000. Salon Products demands an annual return of 12% on investments of this nature.
What is the net present value of each project? What is the maximum acceptable price to pay for each project?