Question

A company is considering an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years
1. The Assembly Division uses the FIFO method of process costing Work in process, beginning inventory: May 1 10,000 units 38,
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Answer #1

Let the rate earned be x

10 million(1+x)^4 = 15 million

X= 10.67%

Hence, the firm should take up project if the interest rate is lower than the return of the project

11% - No

10%, 9%, 8% - Yes

Exact formula is

10 = 15/(1+x)4

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