Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. internal rate of return method-two projects strahn

Internal Rate of Return Method-Two Projects Strahn Foods Inc. is considering two possible investments: a...

50.1K

Verified Solution

Question

Accounting

imageimage Internal Rate of Return Method-Two Projects Strahn Foods Inc. is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $41,420.96 and could be used to deliver an additional 42,000 bags of taquitos chips per year. Each bag of chips can be sold for a contribution margin of $0.38. The delivery truck operating expenses, excluding depreciation, are $0.52 per mile for 14,000 miles per year. The bagging machine would replace an old bagging machine, and its net investment cost would be $45,348.75. The new machine would require three fewer hours of direct labor per day. Direct labor is $15 per hour. There are 250 operating days in the year. Both the truck and the bagging machine are estimated to have nine-year lives. The minimum rate of return is 19%. However, Strahn Foods has funds to invest in only one of the projects. a. Compute the internal rate of return for each investment. Use the above table of present value of an annuity of $1. Enter the present value factor to three decimal places. b. Which of the following should be included in a memo to management regarding the recommendation about the two projects

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students