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Southern Polytechnic State University Operations And Supply Chain Management Assignment Help - Internal Rate of Return


Question - Acme is considering adding an additional driving range to its facility. The range would cost $76,000,
would be depreciated on a straight line basis over its 7-year life, and would have a zero salvage
value. The anticipated income from the project is $34,000 a year with $14,400 of that amount being
variable cost. The fixed cost would be $16,200. The firm believes that it will earn an additional
$13,000 a year from its current operations should the driving range be added. The project will require
$2,000 of net working capital, which is recoverable at the end of the project. What is the internal rate
of return on this project at a tax rate of 34 percent?

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