Youqui Transport is considering three capital expenditure projects. Relevant data for the projects are as follows.

Annual income is constant over the life of the project. Each project is expected to have zero residual value at the end of the project. Youqui uses the straight-line method of depreciation.

Instructions

a. Determine the internal rate of return for each project. Round the internal rate of return factor to three decimals.

b. If Youqui’s required rate of return is 10%, which projects are acceptable?

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Annual Life of Investment Project Income Project 6 years HK$2,400,000 2,700,000 2,800,000 HK$155,000 22A 23A 206,000 9 years 7 years 24A 157,000