Question

Do It Review 26-4 Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $106,145. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $82,700, and annual cash outflows would increase by $47,200. The company's required rate of return is 12 %. Click here to view PV table. Calculate the internal rate of return on this project. (Round answers to 0 decimal places, e.g. 15 %.) Internal rate of return on this project is between % and % . Determine whether this project should be accepted? The project be accepted. UNK ΤOΤΕX a edugen.wileyplus.com References (n) Periods 4% 5% 6% 7% 8% 9% 10% 12% 11% 15 % 0 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1 1.04000 1.05000 1.06000 1.07000 1.08000 1.09000 1.10000 1.11000 1.12000 1.15000 1.08160 1.10250 1.12360 1.14490 1.16640 1.18810 1.21000 1.23210 1.25440 1.32250 1.19102 1.22504 1.12486 1.15763 1.25971 1.29503 1.33100 1.36763 1.40493 1.52088 1.26248 1.31080 1.36049 4 1.16986 1.21551 1.41158 1.46410 1.51807 1.57352 1.74901 1.21665 1.27628 1.33823 1.40255 1.46933 1.61051 5 1.53862 1.68506 1.76234 2.01136 6 1.26532 1.34010 1.41852 1.50073 1.58687 1.67710 1.77156 1.87041 1.97382 2.31306 1.40710 7 1.31593 1.50363 1.60578 1.71382 1.82804 1.94872 2.07616 2.21068 2.66002 1.59385 8 1.36857 1.47746 1.71819 1.85093 1.99256 2.14359 2.30454 2.47596 3.05902 1.42331 1.55133 1.99900 2.17189 9 1.68948 1.83846 2.35795 2.55803 2.77308 3.51788 1.48024 1.79085 2.15892 10 1.62889 1.96715 2.36736 2.59374 2.83942 3.10585 4.04556 1.53945 1.89830 2.10485 11 1.71034 2.33164 2.58043 2.85312 3.15176 3.47855 4.65239 12 1.60103 1.79586 2.01220 2.25219 2.51817 2.81267 3.13843 3.49845 3.89598 5.35025 13 1.66507 1.88565 2.13293 2.40985 2.71962 3.06581 3.45227 3.88328 4.36349 6.15279 14 1.73168 1.97993 2.26090 2.57853 2.93719 3.34173 3.79750 7.07571 4.31044 4.88711 2.07893 15 1.80094 2.39656 2.75903 3.17217 3.64248 4.17725 4.78459 5.47357 8.13706 16 1.87298 2.18287 2.54035 2.95216 3.42594 3.97031 4.59497 5.31089 6.13039 9.35762 17 1.94790 2.29202 2.69277 3.15882 3.70002 4.32763 5.05447 5.89509 6.86604 10.76126 18 2.02582 2.40662 2.85434 3.99602 4.71712 3.37993 5.55992 6.54355 7.68997 12.37545 19 2.10685 2.52695 3.02560 3.61653 4.31570 5.14166 6.11591 7.26334 8.61276 14.23177 20 2.19112 2.65330 3.20714 3.86968 4.66096 5.60441 6.72750 8.06231 9.64629 16.36654

Answer 1

Annual Cash Inflows Net Cash Flows Internal rate of return Initial Year Investment $1,06,145.00 $0.00 $0.00 $0.00 $0.00 ONM $0.00 $82,700.00 $82,700.00 $82,700.00 $82,700.00 Internal Rate of return Increase in annual cash outflows $0.00 $47,200.00 -$47,200.00 -$47,200.00 -$47,200.00 -$1,06,145.00 $35,500.00 $35,500.00 $35,500.00 $35,500.00 13% The Internal rate of return of project is Between 12 % and 15% Should the Project be accepted :- Required rate of 12.00% return Internal rate of 13.00% retrun Yes, As the IRR is greater than required rate of return

B 1 Internal rate of return Initial Year Investment -106145 Annual Cash Inflows Increase in annual cash outflows Net Cash Flows ON 82700 -47200 82700 -47200 82700 -47200 82700 -47200 Internal Rate of return =SUM(B4:04) -SUM(B5:05) =SUM(B6:06) =SUM(B7:07) -SUM(B8:08) =IRR(E4:E8) 11 The Internal rate of return of project is Between 12% and 15% 12 13 14 Should the Project be accepted :- 15 Required rate 16 of return 0.12 17 Internal rate of 18 retrun 0.13 19 Yes, As the IRR is greater than required rate of return 20