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Wildhorse Company is considering a long-term investment project called ZIP. ZIP will require an investment...

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Accounting

Wildhorse Company is considering a long-term investment project called ZIP. ZIP will require an investment of $122,000. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $79,450, and annual expenses (excluding depreciation) would increase by $39,800. Wildhorse uses the straight-line method to compute depreciation expense. The company's required rate of return is 12%.
Compute the annual rate of return.
Wildhorse Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $80,300, and annual expenses (excluding depreciation) would increase by $40,700. Wildhorse uses the straight-line method to compute depreciation expense. The company's required rate of return is 13%.
Compute the annual rate of return.
Annual rate of return
Determine whether the project is acceptable?
the project.
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