Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Chapter 15, Problem 15.17E
To determine
Concept Introduction:
Capital budgeting is a technique to plan long term investment of funds in long term activities whose benefit released for several years.
Example: - Purchase of machineries, purchase of building for business purpose, setting of factories etc.
Requirement-1:
To Calculate:
Internal Rate of Return
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Internal Rate of Return Method
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12%
15%
20%
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0.943 0.909
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1.833 1.736 1.690 1.626 1.528
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4.212 3.791 3.605 3.353 2.991
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4.917 4.355 4.111 3.785 3.326
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3.605
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3.837
9
6.802 5.759 5.328
4.772
10 7.360 6.145 5.650
5.019
4.031
4.192
a. Determine the expected internal rate of return of this project for 6 years, using the present value of an annuity of
$1 table above.
%
b. Identify the uncertainties that could reduce the internal rate of return of this project?
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Internal Rate of Return Method for a Service Company
The Riverton Company, a Utah ski resort, recently announced a $470,340 expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $108,000 in equal annual cash flows for each of the first six years of the project life.
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6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
4.212
3.791
3.605
3.352
2.991
4.917
4.355
4.111
3.784
3.326
7
5.582
4.868
4.564
4.160
3.605
6.210
5.335
4.968
4.487
3.837
6.802
5.759
5.328
4.772
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7.360
6.145
5.650
5.019
4.192
a. Determine the expected internal rate of return of this project for six years, using the present value of an annuity of $1 table above. If required, round your final answer to the nearest whole percent.
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Chapter 15 Solutions
Survey of Accounting (Accounting I)
Ch. 15 - Prob. 1SEQCh. 15 - Management is considering a $100,000 investmentin...Ch. 15 - The expected period of time that will elapse...Ch. 15 - A project that will cost $120,000 is estimated to...Ch. 15 - Prob. 5SEQCh. 15 - What are the principal objections to the use 01the...Ch. 15 - Discuss the principal limitations of the cash...Ch. 15 - Prob. 3CDQCh. 15 - Prob. 4CDQCh. 15 - Prob. 5CDQ
Ch. 15 - Prob. 6CDQCh. 15 - Prob. 7CDQCh. 15 - Prob. 8CDQCh. 15 - Prob. 9CDQCh. 15 - Prob. 10CDQCh. 15 - Prob. 11CDQCh. 15 - Prob. 12CDQCh. 15 - Prob. 13CDQCh. 15 - Prob. 14CDQCh. 15 - Prob. 15CDQCh. 15 - Monsanto Company, a large chemical and...Ch. 15 - Average rate of return The following data are...Ch. 15 - Prob. 15.2ECh. 15 - Average rate of return—new product Arrowhead Inc....Ch. 15 - Calculate cash flows Daffodil Inc. is planning to...Ch. 15 - Prob. 15.5ECh. 15 - Cash payback method Bliss Beauty Products ¡s...Ch. 15 - Prob. 15.7ECh. 15 - Prob. 15.8ECh. 15 - Net present value method—annuity Model 99 Hotels...Ch. 15 - Prob. 15.10ECh. 15 - Prob. 15.11ECh. 15 - Prob. 15.12ECh. 15 - Prob. 15.13ECh. 15 - Average rate of return, cash payback period, net...Ch. 15 - Prob. 15.15ECh. 15 - Internal rate of return method The internal rate...Ch. 15 - Prob. 15.17ECh. 15 - Internal rate of return method—two projects Strahn...Ch. 15 - Prob. 15.19ECh. 15 - Prob. 15.20ECh. 15 - Prob. 15.21ECh. 15 - Prob. 15.22ECh. 15 - Average rate of return method, net present value...Ch. 15 - Average rate of return method, net present value...Ch. 15 - Prob. 15.2.1PCh. 15 - Cash payback period, net present value method, and...Ch. 15 - Prob. 15.3.1PCh. 15 - Prob. 15.3.2PCh. 15 - Prob. 15.3.3PCh. 15 - Prob. 15.4.1PCh. 15 - Prob. 15.4.2PCh. 15 - Prob. 15.4.3PCh. 15 - Prob. 15.5.1PCh. 15 - Prob. 15.5.2PCh. 15 - Prob. 15.5.3PCh. 15 - Prob. 15.6.1PCh. 15 - Prob. 15.6.2PCh. 15 - Prob. 15.6.3PCh. 15 - Prob. 15.6.4PCh. 15 - Capital rationing decision involving four...Ch. 15 - Prob. 15.6.6PCh. 15 - Prob. 15.6.7PCh. 15 - Prob. 15.6.8PCh. 15 - Prob. 15.1.1MBACh. 15 - Prob. 15.1.2MBACh. 15 - Financial leverage MicrosoCortrepotied (MSFT)...Ch. 15 - Prob. 15.1.4MBACh. 15 - Prob. 15.2.1MBACh. 15 - Prob. 15.2.2MBACh. 15 - Prob. 15.2.3MBACh. 15 - Prob. 15.3.1MBACh. 15 - Prob. 15.3.2MBACh. 15 - Prob. 15.3.3MBACh. 15 - Prob. 15.4MBACh. 15 - Prob. 15.5.1MBACh. 15 - Financial leverage Costco Wholesale Corporation...Ch. 15 - Prob. 15.5.3MBACh. 15 - Prob. 15.5.4MBACh. 15 - Ethics and professional conduct in business Erin...Ch. 15 - Prob. 15.2.1CCh. 15 - Prob. 15.2.2CCh. 15 - Prob. 15.2.3CCh. 15 - Prob. 15.3.1CCh. 15 - Prob. 15.3.2CCh. 15 - Qualitative issues in investment analysis The...Ch. 15 - Prob. 15.5.1CCh. 15 - Prob. 15.5.2CCh. 15 - Prob. 15.6C
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