Ontario, Inc. establishes a 5% hurdle rate for its investment projects. The firm is considering three projects: X, Y, and Z at the end of its fiscal year. Ontario, Inc. has sufficient funds to finance all of these independent projects at the beginning of the new year. X Y Z Cost of investment $200,000 $300,000 $250,000 Cash outflow—year 1 15,000 10,000 20,000 Cash outflow—year 2 5,000 10,000 30,000 Cash inflow—year 1 40,000 46,000 75,000 Cash inflow—year 2 40,000 50,000 73,000 Cash inflow—year 3 40,000 44,000 71,000 Cash inflow—year 4 40,000 48,000 69,000 Cash inflow—year 5 40,000 52,000 67,000 Cash inflow—year 6 40,000 56,000 65,000 Required: Using Excel and its appropriate formula, compute the internal rate of return for projects X, Y, and Z. State which projects Ontario should accept.

Ontario, Inc. establishes a 5% hurdle rate for its investment projects. The firm is considering three projects: X, Y, and Z at the end of its fiscal year. Ontario, Inc. has sufficient funds to finance all of these independent projects at the beginning of the new year. X Y Z Cost of investment $200,000 $300,000 $250,000 Cash outflow—year 1 15,000 10,000 20,000 Cash outflow—year 2 5,000 10,000 30,000 Cash inflow—year 1 40,000 46,000 75,000 Cash inflow—year 2 40,000 50,000 73,000 Cash inflow—year 3 40,000 44,000 71,000 Cash inflow—year 4 40,000 48,000 69,000 Cash inflow—year 5 40,000 52,000 67,000 Cash inflow—year 6 40,000 56,000 65,000 Required: Using Excel and its appropriate formula, compute the internal rate of return for projects X, Y, and Z. State which projects Ontario should accept.

Accounting

27th Edition

ISBN:9781337272094

Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Chapter14: Long-term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 14.6CP

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Problem 4–2

	X	Y	Z
Cost of investment	$200,000	$300,000	$250,000
Cash outflow—year 1	15,000	10,000	20,000
Cash outflow—year 2	5,000	10,000	30,000

Cash inflow—year 1	40,000	46,000	75,000
Cash inflow—year 2	40,000	50,000	73,000
Cash inflow—year 3	40,000	44,000	71,000
Cash inflow—year 4	40,000	48,000	69,000
Cash inflow—year 5	40,000	52,000	67,000
Cash inflow—year 6	40,000	56,000	65,000

Required: Using Excel and its appropriate formula, compute the internal rate of return for projects X, Y, and Z. State which projects Ontario should accept.

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