Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:...
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Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
| Project Soup | Project Nuts | |||
| Initial investment | $400,000 | $600,000 | ||
| Annual net income | 30,000 | 46,000 | ||
| Net annual cash inflow | 110,000 | 146,000 | ||
| Estimated useful life | 5 years | 6 years | ||
| Salvage value | -0- | -0- | ||
The company requires a 10% rate of return on all new investments.
| Present Value of an Annuity of 1 | |||||||||
| Periods | 9% | 10% | 11% | 12% | |||||
| 5 | 3.890 | 3.791 | 3.696 | 3.605 | |||||
| 6 | 4.486 | 4.355 | 4.231 | 4.111 | |||||
The internal rate of return for Project Nuts is approximately
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