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The Boston Culinary Institute is evaluating a classroom remodeling project. The cost of the remodel...

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The Boston Culinary Institute is evaluating a classroom remodeling project. The cost of the remodel will be $350.000 and will be depreciated over six years using the straight-line method. The remodeled room will accommodate five extra students per year. Additional information relating to the project follows: Cost of the remodel project 350,000 Useful life of project in years 6 Annual number of extra accommodated students 5 Annual tuition per student 22,000 Before-tax incremental cost of a student 2.000 Company's income tax rate 20% Required rate of return 12% Required Assuming a six-year time horizon, what is the internal rate of return of the remodeling project? Calculate using both present value factors and separately using Excel's IRR function, Annual cash flow: Revenue Less costs: Other than depreciation Depreciation Income before taxes Income tax expense Net income Add depreciation Cash flow Present value factor: factor Indicate how the Internal rate of return is calculated using the factor arrived at above. IRR function Cash Flows Investment 2 3 IRR Use the excel function in cell D43 Should the company invest in the remodel? Explain

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