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You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze six proposed capital investments. Each project has a cost of $1,000, and the required rate of return for each is 12%, determine for each project (a) the internal rate of return. Assume under MACRS the asset falls in the three-year property class and that the corporate tax rate is 25 percent. You are limited to a maximum expenditure of $3000 only for this capital budgeting period. Which projects you will accept and why? Justify your suggestions

You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze six proposed capital investments. Each project has a cost of $1,000, and the required rate of return for each is 12%, determine for each project (a) the internal rate of return. Assume under MACRS the asset falls in the three-year property class and that the corporate tax rate is 25 percent. You are limited to a maximum expenditure of $3000 only for this capital budgeting period. Which projects you will accept and why? Justify your suggestions

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze six proposed capital investments. Each project has a cost of $1,000, and the required rate of return for each is 12%, determine for each project (a) the internal rate of return. Assume under MACRS the asset falls in the three-year property class and that the corporate tax rate is 25 percent. You are limited to a maximum expenditure of $3000 only for this capital budgeting period. Which projects you will accept and why? Justify your suggestions
12 Capital Budgeting and Estimating Cash Flows Table 12.2 PROPERTY CLASS RECOVERY YEAR MACRS depreciation percentages 3-YEAR 5-YEAR 7-YEAR 10-YEAR 10.00% 18.00 33.33% 20.00% 14.29% 44.45 32.00 24.49 3. 14.81 19.20 17.49 14.40 4 7.41 11.52 12.49 11.52 11.52 8.93 9.22 5.76 8.92 7.37 8.93 6.55 6.55 8. 4.46 9. 6.56 10 6.55 11 3.28 Totals 100.00% 100.00% 100.00% 100.00%
Transcribed Image Text:12 Capital Budgeting and Estimating Cash Flows Table 12.2 PROPERTY CLASS RECOVERY YEAR MACRS depreciation percentages 3-YEAR 5-YEAR 7-YEAR 10-YEAR 10.00% 18.00 33.33% 20.00% 14.29% 44.45 32.00 24.49 3. 14.81 19.20 17.49 14.40 4 7.41 11.52 12.49 11.52 11.52 8.93 9.22 5.76 8.92 7.37 8.93 6.55 6.55 8. 4.46 9. 6.56 10 6.55 11 3.28 Totals 100.00% 100.00% 100.00% 100.00%
011111 Project A Project B Project C Project D Project E -1000 Project F Investment -1000 -1000 -1000 -1000 -1000 150 200 250 800 900 1000 2 350 300 250 350 300 200 3 400 500 600 200 150 100 4 700 650 600 200 150
Transcribed Image Text:011111 Project A Project B Project C Project D Project E -1000 Project F Investment -1000 -1000 -1000 -1000 -1000 150 200 250 800 900 1000 2 350 300 250 350 300 200 3 400 500 600 200 150 100 4 700 650 600 200 150
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