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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Changing prices

World Electronics Inc. invested $16,000,000 (o build a plant in a foreign country. The laborand materials used in production are purchased locally. The plant expansion was estimatedto produce an internal rate of return of 20% in U.S. dollar terms. Due to a currency crisis, file currency exchange rate between the local currency and the U.S. dollar doubled fromtwo local units per U.S. dollar to four local units per U.S. dollar.

To determine

Concept Introduction:

IRR:

Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

To Indicate:

The Impact of change in foreign current rates on the IRR

Explanation

Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven...

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