Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed


Comparison of projects with unequal lives



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
13.18 Comparison of projects with unequal lives.
(20–30 min)
1
Internal rate of return Project 1
Let
F
= Present-value factor of €1 at X% received at the end of year 1 (Appendix B, Table 2)
€10,000
= PV of €12,000 at X% to be received at the end of year 1
F
=
10, 000 12, 000


= 0.833
IRR
=
20% Project 2
Let
F
= Present-value factor of €1 at X% received at the end of year 4 (Appendix B, Table 2).
€10,000
= PV of €17,500 at X% to be received at the end of year 4
F
=
10, 000 17, 500


= 0.571


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 The internal rate of return can be calculated by interpolation


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