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Assume Research In Motion invested $834 million to expand its manufacturing capacity. Assume that these assets have a seven-year life, and that Research In Motion requires a 12% internal rate of return on these assets.

1. What is the amount of annual cash flows that Research In Motion must earn from these projects to have a 12% internal rate of return? (Hint: Identify the seven-period, 12% factor from the present value of an annuity table, then divide $834 mill by the factor to get the annual required cash flows.)

2. Assess RIM's most recent annual financial statements, from its website (rim.com) or the SEC's website (sec.gov).

a. Determine the amount that RIM invested in capital assets for that year. (Hint: Refer to the statement of cash flows.)

b. Assume a seven-year life and a 12% internal rate of return. What is the amount of cash flows that RIM must earn on these new projects?

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  • Category:- Accounting Basics
  • Reference No.:- M945301

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