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E12-7 Ueker Company

Price: $1.99


Ueker Company is considering three capital expenditure projects. Relevant data for
the projects are as follows


Project  Investment  Annual Income  Life of Project
 22A   240,000  16,700 6 years 
23A   270,000  20,600 9 years 
24A   280,000  17,500 7 years 

Annual income is constant over the life of the project. Each project is expected to have
zero salvage value at the end of the project. Ueker Company uses the straight-line method
of depreciation.

Instructions
(a) Determine the internal rate of return for each project.
(b) If Ueker Company’s required rate of return is 11%, which projects are acceptable?

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