Question: The reason that a discount factor in Year 3 is less than a discount factor in Year 2 is that Question 34 options: Kenner Company

The reason that a discount factor in Year 3 is less than a discount factor in Year 2 is that

Question 34 options:

Kenner Company is considering two projects.

Project A

Project B

Initial investment

$85,000

$24,000

Annual cash flows

$20,676

$ 6,011

Life of the project

6 years

5 years

Depreciation per year

$14,167

$ 4,800

Present value of an Annuity of $1 in Arrears

Periods

8%

10%

12%

14%

1

0.926

0.909

0.893

0.877

2

1.783

1.736

1.690

1.647

3

2.577

2.487

2.402

2.322

4

3.312

3.170

3.037

2.914

5

3.993

3.791

3.605

4.433

6

4.623

4.355

4.111

3.889

7

5.206

4.868

4.564

4.288

8

5.747

5.335

4.968

4.639

9

6.247

5.759

5.328

4.946

10

6.710

6.145

5.650

5.216

Which of the two projects, A or B, is better in terms of internal rate of return?

Question 33 options:

a)

project A with an IRR of 12%

b)

project B with an IRR of 14%

c)

project A with an IRR of 10%

d)

project B with an IRR of 10%

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