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Summer company 240000

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Summer 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  15,000 6 years
23A   270,000  24,400 9 years
24A   280,000  21,000 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. Summer Company uses the straight-line method
of depreciation.

(a) Determine the internal rate of return for each project. Round the internal rate of
return factor to three decimal
b) If Summer Company’s required rate of return is 11%, which projects are acceptable?
Calculate annual rate of return.

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