1. Capitol Corp. management is expecting a project to generate after-tax income of $77,270 in each of the next three years. The average book value of the project’s equipment over that period will be $200,120. If the firm’s investment decision on any project is based on an ARR of 37.5 percent. (Round answer to 1 decimal places, e.g. 5.2%.) What is the project’s accounting rate of return? Accounting rate of return is %
2. Hathaway, Inc., a resort management company, is refurbishing one of its hotels at a cost of $7,148,432. Management expects that this will lead to additional cash flows of $1,650,000 for the next six years. What is the IRR of this project? If the appropriate cost of capital is 12 percent, should Hathaway go ahead with this project? (Round answer to 2 decimal places, e.g. 5.25%.) The IRR of this project is %