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Discuss the straight-line method of depreciation

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Reference no: EM131780111

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?

Reference no: EM131780111

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