Solution-Should the company invest in the remodel

Should the company invest in the remodel

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Reference no: EM13954615

The Boston Culinary Institute is evaluating a classroom remodeling project The cost of the remodel will be $300,000 and will be depredated over five years using the straight-line metbod.The remodeled room will accommodate five extra students per year. Each student pays annual tuition of $22,000. The before-tax incremental cost of a student (e.g., the cost of food prepared and consumed by a student) is $2,000 per year. The company's tax rate is 40 percent, and the company requires a 12 percent rate of return on the remodeling project.

Required:

Assuming a ±ve-year time horizon, what is the internal rate of return of the remodeling project?
Should the company invest in the remodel?

Reference no: EM13954615

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Should the company invest in the remodel

Reference no: EM13954615

Reference no: EM13954615

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