Answered: A B C D E F Investment $100 $150 $250…

A B C D E F Investment $100 $150 $250 $400 $500 S700 cost (thousands) Annual $15 S37.5 $50 $92.5 $112.5 $142.5 revenue minus expense (thousands) IRR on total 15% 25% 20% 23.1% 22.5% 20.4% investment

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter10: Current Liabilities And Payroll

Section: Chapter Questions

Problem 10.23EX

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Concept explainers

Management by Exception

A manager’s job is a very tough one. A manager needs to look at the various areas of work and as a manager he has to look after two or more important jobs or activities at the same time for the growth of the business. In order to do all these things in an effective manner, a manager must adopt or practice different management styles and tactics.

Question

Six sites have been identified for a parking lot in downtown Blacksburg. Because the sites are plots of land, their salvage value and investment cost are identical. A 10-year study period has been specified, and the MARR is 18% per year.Which site should be chosen based on the IRR criterion?

A
B
C D E
F
Investment
$100 $150 $250 $400 $500 S700
cost (thousands)
Annual
$15 S37.5 $50 $92.5 $112.5 $142.5
revenue minus
expense
(thousands)
IRR on total
15% 25% 20% 23.1% 22.5% 20.4%
investment

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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