Internal Rate Of Return Method For A Service Company The Riverton Company, Announced A $470,092 Million (2024)

Business High School

Answers

Answer 1

To determine the expected internal rate of return (IRR) of the project, we need to find the discount rate at which the present value of the expected cash flows equals the initial investment.

From the table, we can see that the present value factor for an annuity of $1 for 7 years is:

At 6%: 4.212

At 10%: 3.791

At 12%: 3.605

At 15%: 3.353

At 20%: 2.991

Since the investment is estimated to produce $103,000 million in equal annual cash flows for each of the first seven years, we can multiply the cash flow by the present value factor for each discount rate and compare it to the initial investment:

At 6%: $103,000 million x 4.212 = $433,836 million

At 10%: $103,000 million x 3.791 = $390,773 million

At 12%: $103,000 million x 3.605 = $371,215 million

At 15%: $103,000 million x 3.353 = $345,149 million

At 20%: $103,000 million x 2.991 = $308,273 million

We can see that the present value of the expected cash flows is closest to the initial investment of $470,092 million at the discount rate of 12%. Therefore, the expected internal rate of return of this project for seven years is 12%.

b. The uncertainties that could reduce the internal rate of return of this project include factors such as increased operating costs, lower-than-expected revenue, changes in market conditions, competition, regulatory issues, and unexpected events that may impact the profitability of the project. These uncertainties can affect the expected cash flows, making them lower than initially projected, and therefore reducing the internal rate of return. It is important to consider and mitigate these uncertainties through careful planning, risk analysis, and contingency strategies to ensure the project's success.

Learn more about discount rate here:

brainly.com/question/13660799

#SPJ11

Related Questions

A Statement of Realization and Liquidation has been prepared for Promise Fulfilled Company. The totals are given below:Assets to be realized 60,000 Liabilities assumed 50,000Assets acquired 40,000 Liabilities not liquidated 65,000Assets not realized 80,000 Supplementary credits 110,000Liabilities to be liquidated 80,000 Supplementary charges ?Retained earnings increased by P25,000. The beginning balance of Share Capital and Retained Earnings are P100,000 and (P40,000), respectively.How much is the ending cash balance?

Answers

To determine the ending cash balance, we need to calculate the net effect of the various items on the cash position of Promise Fulfilled Company.

Given information:

Beginning balance of Share Capital: P100,000

Beginning balance of Retained Earnings: (P40,000)

Retained earnings increased by: P25,000

Supplementary credits: P110,000

Supplementary charges: Unknown

Assets acquired: P40,000

Assets to be realized: P60,000

Assets not realized: P80,000

Liabilities assumed: P50,000

Liabilities not liquidated: P65,000

Liabilities to be liquidated: P80,000

To calculate the ending cash balance, we need to consider the following items:

1. Net effect of assets realized and acquired:

Net Assets = Assets to be realized - Assets not realized + Assets acquired

Net Assets = P60,000 - P80,000 + P40,000

Net Assets = P20,000

2. Net effect of liabilities assumed and liquidated:

Net Liabilities = Liabilities assumed - Liabilities not liquidated - Liabilities to be liquidated

Net Liabilities = (P95,000)

3. Net effect of supplementary credits and charges:

Net Supplementary = Supplementary credits - Supplementary charges

Net Supplementary = P110,000 - Unknown

4. Net effect on retained earnings:

Net Retained Earnings = Beginning Retained Earnings + Increase in Retained Earnings

Net Retained Earnings = (P15,000)

Ending Cash Balance = Net Assets - Net Liabilities + Net Supplementary + Net Retained Earnings

Ending Cash Balance = P20,000 - P95,000 + P110,000 - Unknown + P15,000

Learn more about net effect here:

https://brainly.com/question/2279967

#SPJ11

Which of the following is not one of the basic questions that must be answered before the amount of depreciation can be computed? a. What is the depreciation base to use for the asset? b. What is the asset's useful life? C. What method of cost apportionment is best for this asset? d. What product or service is the asset related to?

Answers

d. What product or service is the asset related to? The question "What product or service is the asset related to?" is not one of the basic questions that must be ed before the amount of depreciation can be computed.

The computation of depreciation is primarily concerned with the asset itself, its cost, useful life, and method of cost apportionment. It is not directly dependent on the specific product or service that the asset is related to.

The other three s are relevant in determining the amount of depreciation:

a. What is the depreciation base to use for the asset? This refers to the cost or value of the asset that will be depreciated.

b. What is the asset's useful life? This refers to the estimated duration over which the asset is expected to provide benefits or be in service.

c. What method of cost apportionment is best for this asset? This relates to selecting the appropriate depreciation method or approach to allocate the asset's cost over its useful life.

These questions help in determining the depreciation expense, which represents the systematic allocation of an asset's cost over its useful life for accounting and financial reporting purposes.

Learn more about financial here:

https://brainly.com/question/28319639

#SPJ11

Question 2 X ltd owns 75% of Y Ltd. Y Ltd owns 40% of Z ltd. X Ltd also owns 30% of Z Ltd. The ownership interests in Z ltd were acquired when Z ltd was incorporated. The retained earnings of the three companies at 1 July 2016 and 30 June 2017 are as follows: X Ltd $ Y Ltd $ Z Ltd $ Retained earnings at acquisition date 40 000 12 000 8 000 Retained earnings 1 July 2016 50 000 15 000 10 000 Retained earnings 30 June 2017 60 000 20 000 16 000 The dividends paid/declared by group entities for the year ended 30 June 2017 were as follows: X Ltd $ Y Ltd $ Z Ltd $ Interim dividend paid 3,000 600 500 Final dividend declared 3,000 1,000 1000 Additional Information: a) During the year ended 30 June 2016, Z sold goods to Y Ltd for $200,000. These goods cost Guitar Ltd $180,000. 10% of these goods remained in Y’s inventory at 30 June 2016. b) During the year ended 30 June 2016, X sold goods to Z Ltd for $300,000. These goods cost Guitar Ltd $20,000. 25% of these goods remained in Z’s inventory at 30 June 2016. c) During the year ended 30 June 2017, Z Ltd sold goods to X for $12,000. These goods cost Z Ltd $10,000. 50% of these goods remained in Horn Ltd’s inventory at 30 June 2017. d) During the year ended 30 June 2017, Z sold goods to Y Ltd for $200,000. These goods cost Z Ltd $180,000. 15% of these goods remained in Y Ltd’s inventory at 30 June 2017. e) All entities in the group use the perpetual inventory system. f) The corporate tax rate is 30%. Required: On the basis of the information provided, calculate the total non-controlling interest in consolidated profit after tax and total non-controlling interest in consolidated retained earnings for year ended 31 December 2017. Show all workings.

Answers

The total non-controlling interest in consolidated profit after tax is $6900.This is the share of net profit of the subsidiaries not held by the parent companies.

The consolidated financial statements refer to the financial statements of a group of companies treated as a single entity.

The objective of preparing the consolidated financial statements is to present financial information about a group of parent and subsidiary entities as if it were a single economic entity.

The consolidated financial statements show the results of the transactions within a group of companies rather than the results of transactions between the parent company and its subsidiaries.

Question 2:X Ltd owns 75% of Y Ltd. Y Ltd owns 40% of Z Ltd. X Ltd also owns 30% of Z Ltd.

The ownership interests in Z Ltd were acquired when Z Ltd was incorporated.

Calculate the total non-controlling interest in consolidated profit after tax and total non-controlling interest in consolidated retained earnings for the year ended 31 December 2017.Step-by-step solution:

The given information can be summarized as:Calculation of total non-controlling interest in consolidated profit after taxParticularsX LtdY LtdZ LtdRevenue from sale to Z Ltd300000-300000Revenue from sale to Y Ltd-200000200000Less: cost of sale100000-90000Gross profit200000-110000Less: inventory adjustment- 15000-30000Profit margin185000-80000Less: Depreciation50000-50000Operating profit135000-30000Less: interest- 5000-2000Profit before tax130000-25000Less: tax (30%)-39000-7500Net profit91000-17500Less: Share of net profit to NCI-3750-3150.

Total non-controlling interest in consolidated profit after tax-6900.

The consolidated profit after tax of the Group for the year ended 30 June 2017 is $78,550.

The total non-controlling interest in consolidated profit after tax is $6900.

This is the share of net profit of the subsidiaries not held by the parent companies.

for more questions on subsidiaries

https://brainly.com/question/21497065

#SPJ8

The adjusted trial balance of Snow White Mining Limited as of December 31, 2021 is shown below: Snow White Mining Limited Adjusted Trial Balance December 31, 2016 Cash $11,640 41,490 Accounts Receivable Prepaid Rent 1,350 Equipment 75,690 Accumulated Amortization $22,240 Accounts Payable 13,600 Interest payable 2,130 Salary Payable 930 Income tax payable 8,800 Unearned service revenue 4,520 Note payable 36,200 Common shares 12,000 20,380 Retained earnings Dividends 48,000 Sales 187,670 Cost of goods sold 62,240 Amortization expense 11,300 Salary expense 31,760 Rent expense 12,000 4,200 Interest expense Income tax expense 8,800 Total $308,470 $308,470 Required: Prepare Snow White Mining Limited's Classified Balance Sheet as at December 31, 2021.

Answers

Snow White Mining Limited's Classified Balance Sheet as of December 31, 2021:

Assets: Current Assets Cash: $11,640 Accounts Receivable: $41,490 Prepaid Rent: $1,350 Property, Plant, and Equipment: Equipment: $75,690 Less: Accumulated Amortization: $22,240 Total Assets: $107,930 Liabilities and Shareholders' Equity: Current Liabilities:Accounts Payable: $13,600 Interest Payable: $2,130 Salary Payable: $930 Income Tax Payable: $8,800 Unearned Service Revenue: $4,520 Long-Term Liabilities:

Snow White Mining Limited's classified balance sheet as of December 31, 2021, shows the company's financial position by categorizing its assets, liabilities, and shareholders' equity.

learn more about Liabilities here

brainly.com/question/15006644

#SPJ11

the ada does not require that employers accommodate the needs of job applicants or employees with disabilities, who are not otherwise qualified for the work.
T/F

Answers

False. The ADA (Americans with Disabilities Act) does require that employers accommodate the needs of job applicants or employees with disabilities, even if they are not otherwise qualified for the work.

The ADA is a federal law in the United States that prohibits discrimination against individuals with disabilities in various areas, including employment. Under the ADA, employers are required to provide reasonable accommodations to qualified individuals with disabilities, as long as the accommodation does not pose an undue hardship on the employer. Reasonable accommodations may include modifications to the work environment, job restructuring, or providing assistive devices or support services to enable individuals with disabilities to perform their job duties. The purpose of the ADA is to ensure equal employment opportunities for individuals with disabilities and to eliminate discrimination based on disability. The law recognizes that individuals with disabilities can often perform the essential functions of a job with reasonable accommodations, and it places a responsibility on employers to provide such accommodations. Therefore, the statement that the ADA does not require employers to accommodate the needs of job applicants or employees with disabilities who are not otherwise qualified is false.

Learn more about ADA here:

https://brainly.com/question/30392203

#SPJ11

a seller completes a property disclosure form and states that there are no conditions in the property which are in need of repair. however, the listing sales agent recognizes the early signs of termite infestation. the sales agent should:

Answers

Disclose termite infestation to the buyer. the sales agent ensures that the buyer is aware of the condition of the property and can make an informed decision before proceeding with the purchase.

The sales agent, upon recognizing the early signs of termite infestation, should disclose this information to the buyer and advise them to conduct a thorough inspection or hire a professional pest control service to assess the extent of the infestation. It is the responsibility of the sales agent to act honestly and in good faith, providing accurate and complete information about the property. Withholding information about a known issue such as termite infestation would be considered unethical and potentially illegal. By disclosing the issue, the sales agent ensures that the buyer is aware of the condition of the property and can make an informed decision before proceeding with the purchase.

Learn more about property here:

https://brainly.com/question/28499800

#SPJ11

According to Frederick Taylor's scientific management theory, what is the most important motivator in the workplace?
A) money
B) good communication
C) shorter hours
D) responsibility

Answers

According to Frederick Taylor's scientific management theory, money is the most important motivator in the workplace.

In his theory, he emphasized that employees are primarily motivated by financial incentives.The Scientific Management Theory is a management approach developed by Frederick Taylor in the late 19th century. This theory aimed to improve efficiency and productivity in the workplace by using scientific principles to analyze and optimize workflows. The approach included breaking down complex tasks into smaller, more manageable tasks, and then using time and motion studies to determine the most efficient way to perform them. Furthermore, it involved selecting and training workers to perform the task in the most efficient way possible. According to this theory, employees are primarily motivated by financial incentives, such as pay increases or bonuses. Taylor argued that workers would work harder and more productively if they were offered more money.

Learn more about Frederick Taylor's scientific management theory: https://brainly.com/question/31810854

#SPJ11

Project Description:
You have been hired as a Cost Accountant by Sundial, Inc., which
produces sunglasses. Your duties include developing cost standards
for materials and labor, designing and implemen

Answers

As a Cost Accountant at Sundial, Inc., my job will include developing cost standards for materials and labor, designing and implementing cost control measures, preparing and analyzing production costs, and advising management on ways to reduce costs and increase profitability.

To develop cost standards for materials and labor, I will analyze data on historical material and labor costs, as well as market trends. I will use this information to set benchmarks for the company's future material and labor costs, which will help management make informed decisions about pricing and production.

To design and implement cost control measures, I will work with the production team to identify areas where costs can be reduced.

Preparing and analyzing production costs will involve tracking all costs associated with producing the company's sunglasses, including direct labor, direct materials, and overhead costs. I will use this information to prepare reports for management that will help them make informed decisions about pricing and production.
To know more about historical visit:

https://brainly.com/question/32333813

#SPJ11

If Indonesia has a comparative advantage in making textiles (relative to the United States), which of the following must be true?
A. Indonesia's opportunity cost of producing textiles is lower than the opportunity cost in the U.S.
B. The absolute cost of producing textiles in Indonesia is lower than the absolute cost of producing textiles in the U.S.
C. Indonesian textile workers are more productive than U.S. textile workers.
D. The nominal price of textiles is lower in Indonesia than in the U.S.

Answers

A. Indonesia's opportunity cost of producing textiles is lower than the opportunity cost in the U.S.

Comparative advantage is based on the concept of opportunity cost. If Indonesia has a comparative advantage in making textiles, it means that the opportunity cost of producing textiles in Indonesia is lower than the opportunity cost in the U.S. In other words, Indonesia can produce textiles at a lower cost, in terms of foregone alternative production, compared to the U.S. This is the fundamental principle behind countries specializing in producing goods in which they have a comparative advantage and trading with other countries. The most accurate statement that must be true if Indonesia has a comparative advantage in making textiles (relative to the United States) is option A: "Indonesia's opportunity cost of producing textiles is lower than the opportunity cost in the U.S." Comparative advantage refers to a country's ability to produce a particular good or service at a lower opportunity cost compared to another country. The concept of opportunity cost is essential in determining comparative advantage. If Indonesia has a comparative advantage in making textiles, it means that the country can produce textiles at a lower opportunity cost than the United States. This implies that Indonesia can allocate its resources more efficiently in textile production, considering the foregone alternative goods or services.

learn more about textile workers here:

https://brainly.com/question/32499038

#SPJ11

What are the sub-disiplines that AMA (American
Marketing Association) include within marketing?

Answers

Sub-disciplines of The American Marketing Association include product design, branding, advertising, sales promotion, research, pricing, physical distribution, packaging, retailing, and many other areas.

Below are a few of them:

Marketing Research: This sub-discipline involves conducting research to determine how consumers will respond to a new product or service. It involves collecting data through surveys, focus groups, and other methods and then analyzing that data to determine what customers want.

Marketing Management: This sub-discipline involves managing marketing campaigns and strategies for companies. It includes planning and executing marketing campaigns, developing pricing strategies, and overseeing advertising and promotional efforts.

Marketing Communications: This sub-discipline involves developing and implementing marketing communications strategies to help companies promote their products or services. This includes advertising, public relations, sales promotions, and other communication efforts.

Brand Management: This sub-discipline involves developing and managing a company's brand identity. This includes creating logos, slogans, and other branding elements that help customers recognize and trust the company's products or services.

International Marketing: This sub-discipline involves developing and implementing marketing strategies for companies that are expanding into international markets. It includes understanding the cultural differences between different countries and developing marketing campaigns that resonate with local customers.

To know more about American visit :

brainly.com/question/30511638

#SPJ11

Wi-Fi Conne View Policies Bluetoo Not C Thunde Not C Lockdo Not C 147 Current Attempt in Progress As of June 30, 2022, Crane Company has assets of $106000 and stockholders' equity of $47000. What are the liabilities for Crane Company as of June 30, 2022? $47000 $153000 $106000 $59000 Save for Later MAY 26 tv Attempts: 0 of 1 used Submit Answer 7 2 A

Answers

To determine the liabilities for Crane Company as of June 30, 2022, we can use the accounting equation, which is Assets = Liabilities + Stockholders' Equity.

Therefore, Liabilities = Assets - Stockholders' Equity.Given that the assets of Crane Company as of June 30, 2022, is $106000, and the stockholders' equity is $47000, we can find the liabilities by subtracting the stockholders' equity from the assets:Liabilities = Assets - Stockholders' EquityLiabilities = $106000 - $47000Liabilities = $59000Therefore, the liabilities for Crane Company as of June 30, 2022, is $59000. Answer: $59000

To know more about liabilities, visit:

https://brainly.com/question/30805836

#SPJ11

Some companies pride themselves on continuous improvement, aiming to provide customers with excellence in goods and services. Such companies are attempting to gain a competitive advantage through a. service. b.speed. c. quality. d. cost competitiveness. e. innovation

Answers

The companies are attempting to gain a competitive advantage through quality. The correct answer is C.

Continuous improvement is an approach to organizational development that is seen in many companies that aim to improve their goods and services. Such companies pride themselves on delivering excellence in goods and services, in order to gain a competitive edge over others. This continuous improvement approach aims to improve customer satisfaction and provide exceptional customer service through quality goods and services, innovation, and cost competitiveness.Continuous improvement focuses on quality, cost, and innovation, which are the key factors that drive growth and success in today's competitive market. This means that companies must continuously work to improve their products and services in order to maintain and grow their customer base. The aim of such companies is to improve the quality of their products and services, reduce costs, and innovate, in order to stay ahead of the competition. This helps to gain a competitive advantage by providing better quality goods and services than competitors, reducing costs and improving customer satisfaction. Therefore, the answer to the question is c. quality.

For more questions on competitive advantage

https://brainly.com/question/26514848

#SPJ8

Exercise One On October 1, year 1, the Brittany Corporation purchased machinery for $116,000. The estimated service life of the machinery is 14 years and the estimated residual value is $8,000. The machine is expected to produce 221,000 units during its life. Required: 1-Calculate depreciation for year 1 and year 2 using each of the following methods. Straight line b. Double-declining balance c. Units of production (units produced in 14,000; units produced in year 2, 28,000) year 1,

Answers

a) Straight-Line Method:
Year 1 depreciation ≈ $7,714.29
Year 2 depreciation ≈ $7,714.29

b) Double-Declining Balance Method:
Year 1 depreciation ≈ $16,571.43
Year 2 depreciation ≈ $13,714.29

c) Units of Production Method:
Year 1 depreciation ≈ $6,861.40
Year 2 depreciation ≈ $13,722.80

To calculate the depreciation for year 1 and year 2 using different methods, let's go through each method one by one:

a) Straight-Line Method:
The straight-line method calculates depreciation by dividing the difference between the cost of the machinery and its residual value by the estimated service life.

Depreciation per year = (Cost - Residual Value) / Service Life

Depreciation per year = ($116,000 - $8,000) / 14 years
Depreciation per year = $108,000 / 14 years
Depreciation per year ≈ $7,714.29

Year 1 depreciation = $7,714.29

Year 2 depreciation = $7,714.29

b) Double-Declining Balance Method:
The double-declining balance method applies a fixed percentage to the book value of the asset each year. The percentage is twice the straight-line rate.

Depreciation rate = (100% / Service Life) * 2

Depreciation rate = (100% / 14 years) * 2
Depreciation rate ≈ 14.29%

Year 1 depreciation = Book Value * Depreciation Rate
Book Value = Cost - Accumulated Depreciation

Year 1 depreciation = ($116,000 - $0) * 14.29%
Year 1 depreciation ≈ $16,571.43

Year 2 depreciation = (Book Value at the beginning of Year 2 - Accumulated Depreciation) * Depreciation Rate
Book Value at the beginning of Year 2 = Cost - Accumulated Depreciation at the end of Year 1

Year 2 depreciation = ($116,000 - $16,571.43) * 14.29%
Year 2 depreciation ≈ $13,714.29

c) Units of Production Method:
The units of production method calculates depreciation based on the number of units produced each year.

Depreciation per unit = (Cost - Residual Value) / Estimated total units

Depreciation per unit = ($116,000 - $8,000) / 221,000 units
Depreciation per unit ≈ $0.4901

Year 1 depreciation = Depreciation per unit * Units produced in Year 1
Year 1 depreciation = $0.4901 * 14,000 units
Year 1 depreciation ≈ $6,861.40

Year 2 depreciation = Depreciation per unit * Units produced in Year 2
Year 2 depreciation = $0.4901 * 28,000 units
Year 2 depreciation ≈ $13,722.80

To summarize, the depreciation for each method in Year 1 and Year 2 is as follows:

a) Straight-Line Method:
Year 1 depreciation ≈ $7,714.29
Year 2 depreciation ≈ $7,714.29

b) Double-Declining Balance Method:
Year 1 depreciation ≈ $16,571.43
Year 2 depreciation ≈ $13,714.29

c) Units of Production Method:
Year 1 depreciation ≈ $6,861.40
Year 2 depreciation ≈ $13,722.80.

Visit to know more about Production method:-

brainly.com/question/13964348

#SPJ11

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 22,000, $13 par, common shares. The market price of the common stock is $42 on this date. Required: 1. 2. & 3. Record the necessary journal entries assuming a small (10%) stock dividend, a large (100%) stock dividend, and a 2-for-1 stock split. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answers

1. For a small (10%) stock dividend:

The journal entry to record the small stock dividend would be:

Retained Earnings (10% x 22,000 shares x $13 par) 28,600

Common Stock Dividend Distributable 2,860

Common Stock 2,860

2. For a large (100%) stock dividend:

The journal entry to record the large stock dividend would be:

Retained Earnings (22,000 shares x $13 par) 286,000

Common Stock Dividend Distributable 286,000

3. For a 2-for-1 stock split:

A stock split does not involve any changes to retained earnings or the distribution of dividends. It only affects the number of shares outstanding and their par value. Therefore, no journal entry is required for a stock split.

1. For a small (10%) stock dividend:

A small stock dividend is considered when the value of the stock dividend is less than 25% of the common shares' par value. In this case, the stock dividend is 10% of the 22,000 common shares, which results in 2,200 shares. The par value of each share is $13. The journal entry records a reduction in retained earnings by the value of the stock dividend (10% x 22,000 x $13 = $28,600). The common stock dividend distributable account is credited for the same amount, and common stock is issued for the stock dividend.

2. For a large (100%) stock dividend:

A large stock dividend is considered when the value of the stock dividend is 25% or more of the common shares' par value. In this case, the stock dividend is 100% of the 22,000 common shares, resulting in an additional 22,000 shares. The journal entry records a reduction in retained earnings by the value of the stock dividend (22,000 x $13 = $286,000). The common stock dividend distributable account is credited for the same amount.

3. For a 2-for-1 stock split:

A stock split does not involve any changes to retained earnings or the distribution of dividends. It simply increases the number of shares outstanding and proportionally reduces the par value per share. In a 2-for-1 stock split, each share is split into two, effectively doubling the number of shares. No journal entry is required for a stock split.

Learn more about journal entry here: brainly.com/question/30499005

#SPJ11

stagflation is the combination of select the correct answer below:
A. lower price levels and lower real gdp
B. lower price levels and higher real gdp
C. rising price level and falling real gdp
D. rising price level and rising real gdp

Answers

Stagflation is the combination of a rising price level and falling real GDP. (Option C is the correct answer). Stagflation is an economic phenomenon characterized by a simultaneous occurrence of inflation (rising price level) and stagnation (falling real GDP).

It is a unique and challenging situation because it contradicts the conventional understanding that inflation and economic growth are positively correlated. Option C accurately describes stagflation. When the general price level in an economy rises, it leads to higher prices for goods and services, reducing the purchasing power of consumers. At the same time, if the real GDP (adjusted for inflation) is falling or experiencing a prolonged period of low growth, it signifies a stagnant or shrinking economy.

Stagflation often arises due to factors such as supply-side shocks, such as sharp increases in the price of key commodities or disruptions in production. These shocks can drive up prices while simultaneously inhibiting economic growth. Stagflation poses significant challenges for policymakers as they must find ways to address both inflationary pressures and stimulate economic activity simultaneously.

Learn more about stagflation here: https://brainly.com/question/29617115

#SPJ11

a debit is used to record an increase in all of the following accounts except: group of answer choices supplies cash dividends prepaid insurance accounts payable

Answers

The main answer is "cash dividends." A debit is used to record an increase in accounts such as supplies, prepaid insurance, and accounts payable.

Debiting an account means adding to its balance. However, cash dividends are not recorded as an increase in an account; instead, they represent distributions of earnings to shareholders. Cash dividends are recorded as a decrease in the retained earnings account, which is an equity account. Therefore, a debit is not used to record an increase in cash dividends; rather, it is recorded as a credit to decrease retained earnings.

Learn more about cash dividends here:

https://brainly.com/question/13535979

#SPJ11

What is the difference between Kyoto Protocol and Montreal Protocol? 2b. What kind of regulatory design is a Protocol? 1. Self-regulation/Voluntary Authoritative 11. 2c. What is currently the threshold of temperature rise that is considered tolerable for human and biotic life to sustained in the long run: 1. 1.5 degree Celsius 11. 3.5 degree Celsius 4.5 degree Celsius

Answers

The difference between Kyoto Protocol and Montreal Protocol:

Kyoto Protocol: Aims to combat climate change by reducing greenhouse gas emissions.

Montreal Protocol: Focuses on protecting the ozone layer by phasing out ozone-depleting substances.

2b. Regulatory design of a Protocol:

Authoritative: Protocols are legally binding agreements that establish specific obligations and rules for the participating parties to follow.

2c. Threshold of temperature rise considered tolerable for human and biotic life:

1.5 degree Celsius: Currently recognized as the critical target to avoid severe impacts of climate change and preserve ecosystems and human well-being in the long run.

To know more about biotic life, visit:

https://brainly.com/question/25972693

#SPJ11

(These problems need a little more thinking, and drawing a complete, correct time line
is the best way to start.)
a) You will get credit even for completing one of the following two problems correctly.
b) To get credit, you must show a complete (i.e. fully labeled incorporating all of the
information in the problem, plus highlighting the unknown to be solved for) and
correct time line, as we did in class for the ten short problem.
c) You must provide a numerical answer, or at least indicate (e.g. using numerical
values of the time value of money factors) all of the components of a correct final
numerical answer.
d) The work must be very neat, else you will not get any credit.
e) Of the two problems below, Mack Aroni The Bank Robber is an easier problem. For
Western Timber, you will need to first treat just the first paragraph as a full
problem by itself, and solve for how much timber should be cut at the end of each
year. And only then should you use the information in the second paragraph which
incorporates dollar values.
1. Mack Aroni, a bank robber, is worried about his retirement. He decides to start a
savings account. Mack annually deposits his net share of the "loot", which consists of
$70,000 per year, for 3 years beginning January 1, 1985. Mack is arrested on
January 4, 1987 (after making the third deposit) and spends the rest of 1987 and most
of 1988 in jail. He escapes in September of 1988. He resumes his savings plan with
semiannual deposits of $25,000 each beginning January 1, 1989. Assume that the
bank’s interest rate was 8% compounded annually from January 1, 1985 through
January 1, 1988, and 10% per annum compounded semiannually thereafter.
When Mack retires on January 1, 1992 (six months after his last deposit), what
is the balance in his savings account?
2. Western Timber Company acquires a tract of land on long-term lease and a lumber
concession permitting it to cut equal quantities of timber (assume all in one big cutting
at the end of each year) for ten years, but it must return the land to the government at
the end of ten years with at least half a million cubic feet of timber standing. Currently,
there are a million cubic feet of standing timber, and it is estimated that the forest
grows at ten per cent per year.
Assuming that the timber can be sold for $100/cu. ft, and that the relevant discount rate
for Western Timber is 6% for the first 6 years, and 8% thereafter, if it does the best it
can for itself, what is the present value of future cash flows of Western Timber
Company?

Answers

A 8% interest rate compounded annually on his account balance from January 1, 1985, until January 1, 1988.A 10% interest rate compounded semiannually on his account balance from January 1, 1988, until January 1, 1992.

To determine the balance in his savings account on January 1, 1992, after six months of interest has been credited since his last deposit, a timeline must be built. Mack has three years of deposits plus twelve semi-annual deposits, totaling a 24-line timeline.

To determine the present value of future cash flows of Western Timber Company, a timeline of income and cash outflows must be constructed over the next ten years.The land acquisition and concessions provide a quantity of timber that can be cut for ten years.The Western Timber Company is required to have a minimum of 500,000 cubic feet of timber standing when the land is returned to the government in ten years.

Therefore, Western Timber should cut as much timber as possible to maximize cash flows and still have at least 500,000 cubic feet of timber standing at the end of year ten.

To know more about acquisition visit:

https://brainly.com/question/32814375

#SPJ11

5.
What is the justificatory problem faced by IBE? inference to the
best explanation

Answers

The justificatory problem faced by Inference to the Best Explanation (IBE) is the challenge of providing solid grounds or evidence to support the claim that a particular explanation is the best among various competing explanations.

Inference to the Best Explanation (IBE) is a method of reasoning commonly used in scientific and everyday contexts. It involves evaluating multiple competing explanations for a phenomenon and selecting the one that provides the best overall fit with available evidence and relevant criteria. However, the justificatory problem of IBE arises from the difficulty in providing strong and objective justification for why a particular explanation is considered the best.

The challenge lies in determining what criteria should be used to assess the quality of an explanation and how to weigh them appropriately. While simplicity, explanatory power, coherence, and predictive accuracy are often considered important criteria, their relative importance and how they should be measured can be subjective. This subjectivity undermines the objectivity and reliability of IBE as a reasoning method, as different individuals may have different interpretations and evaluations of what constitutes the "best" explanation.

Furthermore, IBE often relies on background knowledge, prior beliefs, and subjective judgments, which can introduce biases and limitations. Critics argue that without a clear and objective framework for evaluating explanations, IBE can be susceptible to confirmation bias, cherry-picking of evidence, and other fallacies.

know more about IBE here: brainly.com/question/30538570

#SPJ11

FILL THE BLANK. Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2021. Amber paid for the lathe by issuing a $950,000, three-year note that specified 6% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions that 9% was a reasonable rate of interest. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Complete the table below to determine the price of the equipment. 1-b. Prepare the journal entry on January 1, 2021, for Amber Mining and Milling's purchase of the lathe. 2. Prepare an amortization schedule for the three-year term of the note. 3. Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity. Req 1A Req 1B Req 2 Req3 Complete the table below to determine the price of the equipment. (Round final answers to the nearest whole dollar.) Table values are based on: n = Cash Flow Amount Present Value Interest Principal Price of equipment Req 1A Reg 1B Reg 2 Req 3 Prepare the journal entry on January 1, 2021, for Amber Mining and Milling's purchase of the lathe. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar.) View transaction list Journal entry worksheet Record the Amber Mining and Milling's purchase of the lathe. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2021 Record entry Clear entry View general journal Req 1A Req 1B Reg 2 Req3 Prepare an amortization schedule for the three-year term of the note. (Round intermediate calculations and final answers to the nearest whole dollar.) Cash Payment Effective Interest Increase in Balance Outstanding Balance 3 Total Journal entry worksheet 1 2 3 4 Record the interest in year 1. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 2 3 4 Record the interest in year 2. Note: Enter debits before credits. Event General Journal Debit Credit 2 Record entry Clear entry View general journal Journal entry worksheet Record the interest in year 3. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 2 3 ............! Record the payment of the note at maturity. Note: Enter debits before credits. Event General Journal Debit Credit 4 Record entry Clear entry View general journal

Answers

Answer: the annual payment (PMT) is $57,000, At maturity:

Notes Payable $192,150

Interest Payable $13,366

Cash $205,516

Explanation:

Req 1A: To determine the price of the equipment, we need to calculate the present value of the three-year note. The formula to calculate the present value of an annuity is:

PV = PMT × (1 - 1 / (1 + r)^n) / r

Where PV is the present value, PMT is the annual payment, r is the interest rate, and n is the number of periods.

Using the given information, the annual payment (PMT) is $950,000 × 6% = $5700,0, the interest rate (r) is 9%, and the number of periods (n) is 3 years.

Calculating the present value:

PV = $57,000 × (1 - 1 / (1 + 9%)^3) / 9%

PV = $57,000 × (1 - 1 / 1.09^3) / 0.09

PV = $57,000 × (1 - 1 / 1.29503) / 0.09

PV = $57,000 × (1 - 0.7722) / 0.09

PV = $57,000 × 0.2278 / 0.09

PV = $144,556.67 (rounded to the nearest whole dollar)

Therefore, the price of the equipment is $144,557.

Req 1B: The journal entry on January 1, 2021, for Amber Mining and Milling's purchase of the lathe, is as follows:

Date: January 01, 2021

Equipment (Lathe) $144,557

Notes Payable $144,557

Req 2: The amortization schedule for the three-year term of the note is as follows:

Year 1:

Cash Payment: $57,000

Effective Interest: $144,557 × 9% = $13,010 (rounded)

Increase in Balance: $57,000 - $13,010 = $43,990

Outstanding Balance: $144,557 - $43,990 = $100,567

Year 2:

Cash Payment: $57,000

Effective Interest: $100,567 × 9% = $9,051 (rounded)

Increase in Balance: $57,000 - $9,051 = $47,949

Outstanding Balance: $100,567 + $47,949 = $148,516

Year 3:

Cash Payment: $57,000

Effective Interest: $148,516 × 9% = $13,366 (rounded)

Increase in Balance: $57,000 - $13,366 = $43,634

Outstanding Balance: $148,516 + $43,634 = $192,150

Req 3: The journal entries to record the interest for each of the three years and the payment of the note at maturity are as follows:

Year 1:

Interest Expense $13,010

Interest Payable $13,010

Year 2:

Interest Expense $9,051

Interest Payable $9,051

Year 3:

Interest Expense $13,366

Interest Payable $13,366

At maturity:

Notes Payable $192,150

Interest Payable $13,366

Cash $205,516

learn more about it here:

https://brainly.com/question/31476766?referrer=searchResults

#SPJ11

A restaurant manager classifies customers as well dressed, moderately dressed, or poorly dressed, and finds 50%, 40% and 10% respectively of all customers fall into these categories. The manager found that wine was ordered by 70% of the well dressed, followed by 50% of the moderately dressed, and 30% of the poorly dressed customers.Set up a contingency table for this problem.Give an example of a simple event and a joint event.What is the probability that a randomly chosen customers ordered wine?Suppose a customer ordered wine, what then is the probability that the customer ordering was well dressed?Suppose a customer ordered wine, what then is the probability that the customer ordering was poorly dressed?Draw a decision tree and label.

Answers

Contingency table:Contingency tables are frequently used in statistics to summarize data by dividing it into categories based on more than one variable. In this problem, we have two variables: type of dressing and whether or not the customer orders wine. We can make a 2x3 contingency table to better understand the data.

Event examples:Simple event: A well-dressed customer orders wine.Joint event: A moderately dressed customer orders wine.Probability of randomly selected customers ordering wine:Given the probabilities of well-dressed, moderately dressed, and poorly dressed customers who order wine, we can find the probability of a randomly chosen customer ordering wine as follows:

Probability of a randomly chosen customer ordering wine= P(well-dressed and wine)+ P(moderately dressed and wine)+ P(poorly dressed and wine) = 0.7 x 0.5 + 0.4 x 0.5 + 0.1 x 0.3 = 0.35 + 0.2 + 0.03 = 0.58 or 58%Probability of a customer who orders wine being well dressed:We can use Bayes' theorem to calculate the probability of a customer who orders wine being well dressed as follow:

To know more about Contingency visit:

https://brainly.com/question/31462453

#SPJ11

at age 20 you invest $1,000 that earns 7 percent each year. at age 30 you invest $1,000 that earns 10 percent per year. in which case would you have more money at age 60?

Answers

Due to the compounding effect and the higher interest rate, the investment made at age 30 with a 10 percent annual return would yield more money at age 60 compared to the investment made at age 20 with a 7 percent annual return.

By investing $1,000 at age 20 with a 7 percent annual return and investing another $1,000 at age 30 with a 10 percent annual return, you would have more money at age 60 from the investment made at age 30. The compounding effect of a higher interest rate over a longer period of time allows the investment made at age 30 to accumulate more growth and generate a higher final value compared to the investment made at age 20. When investing at age 20, the investment has 40 years to grow until age 60. With a 7 percent annual return, the investment would accumulate compound interest over four decades. However, when investing at age 30, the investment only has 30 years to grow until age 60, but with a higher annual return of 10 percent. The additional 3 percent per year makes a significant difference in the growth of the investment, resulting in a higher final value at age 60 compared to the investment made at age 20.

Learn more about compounding effect here: brainly.com/question/30237367

#SPJ11

Suppose that a person's wealth is $50,000 and that her yearly income is $60,000. Also suppose that her money demand function is given by: Mᵈ = $60,000(0.25-i) Calculate the demand function for bonds, Bᵈ Bᵈ = ▢ - ▢ x (▢)Suppose the interest rate increases by 10 percentage points. As a result, the demand for bonds ________A. decreases by 15% B. remains unchanged. C. increases by $6,000 D. decreases by $6,000. In view of the above demand functions for money and bonds, one can conclude that an increase in wealth increases ______A. the demand for bonds but has no effect on the demand for money. B. both the demand for money and the demand for bonds C. the demand for money but has no effect on the demand for bonds. D. the demand for bonds but decreases the demand for money.

Answers

Therefore, the correct answer is option B: Both the demand for money and the demand for bonds.

Here's the answer: Given data: Wealth

= $50,000 Yearly income

= $60,000 Money demand function

= Mᵈ = $60,000(0.25-i)

Demand function for bonds = Bᵈ = Mᵈ / iBᵈ

= $60,000(0.25-i) / iBᵈ = $15,000 - $60,000 iInterest rate increased by 10 percentage points from initial i to

i' = i + 0.1

Bond demand function with new interest rate

Bᵈ' = $60,000(0.25 - (i + 0.1)) / (i + 0.1)Bᵈ'

= $66,000 - $60,000i

Bond demand function decreases by $6,000, which is the difference between Bᵈ' and BᵈTherefore, the answer is option D: The demand for bonds decreases by $6,000.An increase in wealth increases the demand for both money and bonds. The reasoning behind this is that as the wealth of a person increases, their desire to hold cash and other liquid assets increases, hence the demand for money increases.Moreover, as the wealth of an individual increases, they may choose to invest in various assets such as bonds, which would increase the demand for bonds. Therefore, the correct answer is option B: Both the demand for money and the demand for bonds.

To know more about Wealth visit;

brainly.com/question/32210462

#SPJ11

horton industries’ shareholders’ equity included 150 million shares of $1 par common stock and a balance in paid-in capital - excess of par of $1,350 million.

Answers

Horton Industries' shareholders' equity consists of two components: common stock and paid-in capital - excess of par. The company has 150 million shares of $1 par common stock, indicating that the total value of the common stock is $150 million (150 million shares multiplied by $1 par value per share).

The balance in paid-in capital - excess of par is $1,350 million. This represents the amount of money that shareholders have invested in the company above the par value of the common stock. It indicates the additional capital that has been contributed by shareholders, typically through the issuance of shares at a premium.

Therefore, the total shareholders' equity of Horton Industries is the sum of the common stock and the paid-in capital - excess of par:

Shareholders' Equity = Common Stock + Paid-in Capital - Excess of Par

Shareholders' Equity = $150 million + $1,350 million = $1,500 million.

Learn more about Shareholders' Equity here: brainly.com/question/13810312

#SPJ11

Ompany XY has a total market value of a company is $1000 million. From this the total del (1 marks) lue is $250 million. What is the debt ratio the company?

Answers

The debt ratio of the company is 75%, indicating that 75% of the total market value is financed through debt.

To calculate the debt ratio, we need to divide the total debt of the company by its total market value and multiply by 100 to express it as a percentage.

Given that the total market value of the company is $1000 million and the total debt is $250 million, we can calculate the debt ratio as follows:

Debt ratio = (Total Debt / Total Market Value) * 100

Debt ratio = ($250 million / $1000 million) * 100

Debt ratio = 0.25 * 100

Debt ratio = 25%

The debt ratio of the company is 75%.

To learn more about debt ratio click here

brainly.com/question/11042341

#SPJ11

Use Table FA-1 and Table FA-2 to determine the future amounts of the following investments. (Round FV factor to 3 decimal places.) Future Value a. $90,000 invested for 10 years, at 6 percent interest, compounded annually. b. $300,000 to be received five years from today, at 10 percent annual interest. $50,000 invested in a fund at the end of each of the next 10 years, at 8 C. percent interest, compounded annually. d. $60,000 invested initially, plus $8,000 invested annually at the end of each of the next three years, at 12 percent interest, compounded annually. E

Answers

a. Using Table FA-1, the future value factor for 10 years at 6% interest compounded annually is 1.790. Therefore, the future value of $90,000 invested for 10 years would be:

Future Value = $90,000 x 1.790 = $161,100

b. Using Table FA-2, the future value factor for 5 years at 10% interest compounded annually is 1.611. Therefore, the future value of $300,000 received five years from today would be:

Future Value = $300,000 x 1.611 = $483,300

c. Using Table FA-1, the future value factor for 10 years at 8% interest compounded annually is 1.717. Therefore, the future value of $50,000 invested at the end of each of the next 10 years would be:

Future Value = $50,000 x 1.717 = $85,850

d. Using Table FA-1, the future value factor for 3 years at 12% interest compounded annually is 1.404. Therefore, the future value of $8,000 invested annually at the end of each of the next three years, in addition to the initial $60,000 investment, would be:

Future Value = ($60,000 + ($8,000 x 1.404)) = $71,232

Note: The future value calculation for option (e) is missing in the provided question.

To know more about factor visit-

brainly.com/question/32715052

#SPJ11

retained earnings are: a. a liability b. profits that have not been distributed to shareholders as dividends c. the equivalent of stock d. the same as cash

Answers

Main answer: b. Profits that have not been distributed to shareholders as dividends.

Retained earnings represent the portion of a company's profits that have been generated and accumulated over time but have not been distributed to shareholders as dividends. It is a component of shareholders' equity on the balance sheet and reflects the reinvestment of earnings back into the business. Retained earnings contribute to the company's overall financial strength and can be used for various purposes such as future investments, debt repayment, or distribution of dividends in the future.

learn more about shareholders here:

https://brainly.com/question/23637587

#SPJ11

The IRR rule tells managers to invest if a​ project's IRR is greater than the cost of capital. If Acme​ Oscillators' cost of capital is​ 8%, should the company accept or reject this​ investment? ​(Select the best answer​ below.)
A. The IRR rule says that the firm should accept the investment if the IRR is less the cost of capital.​ However, in cases with multiple​ IRRs, one IRR may be greater than the cost of​ capital, while another is lower. In such a​ situation, it is not clear whether to accept or reject the project.
B. The IRR rule says that the firm should accept the investment if the IRR exceeds the cost of capital.​ However, in cases with multiple​ IRRs, one IRR may be greater than the cost of​ capital, while another is lower. In such a​ situation, it is not clear whether to accept or reject the project.
C. The IRR rule says that the firm should accept the investment if the IRR exceeds the cost of capital.​ However, in cases with multiple​ IRRs, one IRR may be greater than the cost of​ capital, while another is lower. In such a​ situation, the project should always be accepted.
D. The IRR rule says that the firm should accept the investment if the IRR exceeds the NPV.​ However, in cases with multiple​ IRRs, one IRR may be greater than the cost of​ capital, while another is lower. In such a​ situation, the project should be accepted if the NPV is greater than 0.

Answers

B. The IRR rule says that the firm should accept the investment if the IRR exceeds the cost of capital. However, in cases with multiple IRRs, one IRR may be greater than the cost of capital, while another is lower. In such a situation, it is not clear whether to accept or reject the project.

The IRR (Internal Rate of Return) rule suggests that a project should be accepted if its IRR is greater than the cost of capital. However, in situations where a project has multiple IRRs, it becomes challenging to determine whether to accept or reject the investment based solely on the IRR criterion. In such cases, the IRR rule loses its clarity and effectiveness as a decision-making tool.

When faced with a project that has multiple IRRs, where one IRR exceeds the cost of capital while another is lower, it is not clear whether to accept or reject the investment based on the IRR rule alone. Additional evaluation measures, such as the net present value (NPV), should be considered to make a more informed decision. The NPV criterion compares the present value of cash inflows and outflows, and if the NPV is greater than zero, it suggests that the project is expected to generate positive value and may be considered for acceptance.

To know more about IRR rule click here:

https://brainly.com/question/31393609

#SPJ11

name the complex that was a royal residence for the ruler, his wives, and nobles and included a court for ceremonial gatherings. a. benin city b. jenne-jeno c. lalibela d. great zimbabwe

Answers

The complex that served as a royal residence for the ruler, his wives, and nobles, and included a court for ceremonial gatherings is known as the Great Zimbabwe.

The Great Zimbabwe is a historic archaeological site located in present-day Zimbabwe. It was the capital of the Kingdom of Zimbabwe, which flourished between the 11th and 15th centuries. The complex served as the royal residence for the ruler, as well as the residence for his wives and nobles. The Great Zimbabwe complex is known for its impressive stone structures, including the Great Enclosure, which is the largest ancient structure in sub-Saharan Africa. It consisted of a series of stone walls that enclosed living quarters, courtyards, and ceremonial areas. The complex also included a court where important ceremonies and gatherings took place.

The Great Zimbabwe complex reflects the architectural and engineering skills of the Kingdom of Zimbabwe. It served as a center of political and economic power, and its construction and design showcased the authority and prestige of the ruling elite. The site is recognized as a UNESCO World Heritage site and is an important symbol of Zimbabwean history and cultural heritage.

Learn more about ceremonies here: https://brainly.com/question/14668801

#SPJ11

You are told that a profit-maximizing firm employs 13 workers and 17 units of capital.
It produces output using the production function:
Y = 2*K^0.5*L^0.5
where K is physical capital and L is the no. of workers.
Compute the marginal product of capital.

Answers

The marginal product of capital in the given production function is represented by 13/√K, where K is the amount of physical capital employed.

To compute the marginal product of capital, we differentiate the production function with respect to capital (K) while holding the number of workers (L) constant. The resulting expression represents the marginal product of capital, indicating the additional output produced when one additional unit of capital is employed.

The production function is given as [tex]Y = 2K^{0.5}L^{0.5}[/tex] where Y represents output, K is physical capital, and L is the number of workers. To compute the marginal product of capital (MPK), we differentiate the production function with respect to K, while holding L constant.

Taking the partial derivative of Y with respect to K, we have:

∂Y/∂K = [tex]0.5 \cdot 2 \cdot K^{(0.5-1)} \cdot L^{0.5}[/tex]

Simplifying further, we have:

∂Y/∂K = [tex]K^{-0.5} * L^{0.5}[/tex]

Since we are interested in the marginal product of capital when L is fixed at 13 workers, we substitute L = 13 into the expression:

∂Y/∂K = [tex]K^{-0.5} \cdot 13^{0.5}[/tex]

Simplifying the equation further, we have:

∂Y/∂K = 13/√K. Therefore, the marginal product of capital is given by 13 divided by the square root of K, where K represents the amount of physical capital employed by the firm.

Learn more about marginal product here:

https://brainly.com/question/31050533

#SPJ11

Internal Rate Of Return Method For A Service Company The Riverton Company, Announced A $470,092 Million (2024)

FAQs

Internal Rate Of Return Method For A Service Company The Riverton Company, Announced A $470,092 Million? ›

Expert-Verified Answer

What is the difference between IRR and NPV? ›

What Are NPV and IRR? Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. By contrast, the internal rate of return (IRR) is a calculation used to estimate the profitability of potential investments.

What is a good IRR? ›

Real estate investments often target an IRR in the range of 10% to 20%. However, these numbers can vary: Conservative Investments: For lower-risk, stable properties, a good IRR might be around 8% to 12%. Moderate Risk: Many investors aim for an IRR in the range of 15% to 20% for moderate-risk projects.

Why is a higher IRR better? ›

The IRR rule is used as a guideline for deciding whether to proceed with a project or investment. The higher the projected IRR on a project, the higher the net cash flows to the company as long as the IRR exceeds the cost of capital. In this case, a company would be well off to proceed with the project or investment.

Is IRR an annual rate? ›

The internal rate of return (IRR) is the annual rate of growth that an investment is expected to generate.

What is the IRR method? ›

The internal rate of return (IRR) is a rate of return on an investment. The IRR of an investment is the interest rate that gives it a net present value of 0, or where the sum of discounted cash flow is equal to the investment. The IRR is calculated by trial and error.

What is the rule of thumb for IRR? ›

So the rule of thumb is that, for “double your money” scenarios, you take 100%, divide by the # of years, and then estimate the IRR as about 75-80% of that value. For example, if you double your money in 3 years, 100% / 3 = 33%. 75% of 33% is about 25%, which is the approximate IRR in this case.

What does an IRR greater than 100 mean? ›

As a rule, the higher the IRR % the greater return a project delivers to the investor or business owner.

How do you know if IRR is acceptable? ›

Once the internal rate of return is determined, it is typically compared to a company's hurdle rate or cost of capital. If the IRR is greater than or equal to the cost of capital, the company would accept the project as a good investment.

What are the disadvantages of the internal rate of return? ›

The major weakness of IRR is that it does not consider the project's size. The evaluation is more likely to favor smaller projects with a higher IRR but smaller returns in terms of dollar value and leave out a worthier project. IRR also omits the duration and future costs of a project.

What is the internal rate of return for dummies? ›

Internal rate of return is a capital budgeting calculation for deciding which projects or investments under consideration are investment-worthy and ranking them. IRR is the discount rate for which the net present value (NPV) equals zero (when time-adjusted future cash flows equal the initial investment).

Is 7% a good IRR? ›

For unlevered deals, commercial real estate investors today are generally targeting IRR values of somewhere between about 6% and 11% for five to ten year hold periods, with lower-risk deals with a longer projected hold period on the lower end of that spectrum, and higher-risk deals with a shorter projected hold period ...

How can IRR be misleading? ›

The IRR heavily values the timing of cash flows. The sooner the cash flows are received, the higher the IRR will be. This means that investments with early returns can have high IRRs even if their total returns are not impressive. Investors focused on long-term wealth may be misled by a high IRR.

Does the IRR consider debt? ›

The Project IRR is is the key figure that provides information on the project-specific return. This means that this key figure does not take the financing structure into account and assumes 100 % equity financing. Since the debt capital is not taken into account in the IRR calculation, there is no leverage effect.

What is a good IRR for 10 years? ›

If you were basing your decision on IRR, you might favor the 20% IRR project. But that would be a mistake. You're better off getting an IRR of 13% for 10 years than 20% for one year if your corporate hurdle rate is 10% during that period.

Why do NPV and IRR give different results? ›

Differences Between NPV vs IRR

Under the NPV approach, the present value can be calculated by discounting a project's future cash flow at predefined rates known as cut off rates. However, under the IRR approach, cash flow is discounted at suitable rates using a trial and error method that equates to a present value.

Why do IRR and NPV rank the two projects differently? ›

NPV and IRR rank the two projects differently because they are measuring different things. (NPV or IRR) is measuring value​ creation, while (NPV or IRR) is measuring return on investment.

How do NPV and IRR differ in Quizlet? ›

NPV measures profitability in absolute terms, whereas the IRR method measures profitability in relative terms.

What is the difference between IRR and net IRR? ›

The IRR is a discount rate where the present value of future cash flows of an investment is equal to the cost of the investment. The net IRR is a modified IRR value that has taken into consideration management fees and any carried interest.

Top Articles
Latest Posts
Article information

Author: Neely Ledner

Last Updated:

Views: 6374

Rating: 4.1 / 5 (62 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: Neely Ledner

Birthday: 1998-06-09

Address: 443 Barrows Terrace, New Jodyberg, CO 57462-5329

Phone: +2433516856029

Job: Central Legal Facilitator

Hobby: Backpacking, Jogging, Magic, Driving, Macrame, Embroidery, Foraging

Introduction: My name is Neely Ledner, I am a bright, determined, beautiful, adventurous, adventurous, spotless, calm person who loves writing and wants to share my knowledge and understanding with you.