Manitoba Railroad Limited (MRL) is considering spending $522 million to add new locomotives and train cars. It

Question:

Manitoba Railroad Limited (MRL) is considering spending $522 million to add new locomotives and train cars. It is estimated that the trains will last 15 years and have an estimated of $50 million at the end of 15 years. Expected annual revenue increases before depreciation for the first five years are $75 million, for the next five years are $50 million, and for the last five years are $40 million. MRL's is 7%.
Required:
(a) Calculate:
(i) Accounting rate of return
(ii)
(iv) Internal rate of return.
(b) State, with reasons, your recommendation to MRL concerning implementation of this project. Net Present Value
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