Event Supplies is evaluating a renovation of its retail store.The cost of the renovation is estimated to be $290,000 and will be depreciated over 8 years using the straight-line method.The renovation is expected to generate additional annual revenue of $86,500, annual operating cash flows are expected to increase by $50,775, and net income is expected to increase by $14,525 per year.The company's income tax rate is 30% and its minimum required rate of return is 9%.To which of the following amounts is the internal rate of return of the renovation closest?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is closest to the company's minimum required rate of return of 9% since the renovation is expected to generate positive cash flows and net income. Option B (8.2%) is the closest to this requirement among the provided choices, indicating a profitable but not excessively high return, aligning with the given financial figures and the nature of the renovation investment.

Event Supplies Is Evaluating a Renovation of Its Retail Store