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

Question:

The Boston Culinary Institute is evaluating a classroom remodeling project The cost of the remodel will be $300,000 and will be depredated over five years using the straight-line metbod.The remodeled room will accommodate five extra students per year. Each student pays annual tuition of $22,000. The before-tax incremental cost of a student (e.g., the cost of food prepared and consumed by a student) is $2,000 per year. The company’s tax rate is 40 percent, and the company requires a 12 percent rate of return on the remodeling project.

Required
Assuming a ñve-year time horizon, what is the of the remodeling project?
Should the company invest in the remodel?

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...