Iggy Company is considering three capital expenditure projects

Accounting Apr 06, 2021

Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.

ProjectInvestmentAnnual

Income Life of Project

22A$240,500 $16,880 6 years

23A272,700 20,620 9 years

24A280,500 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.

(a)

Determine the internal rate of return for each project.

(b)

If Iggy Company's required rate of return is11%, which projects are acceptable?

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