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Scholastic Works Company is evaluating a classroom remodeling project. The cost of the remodel will be $400,000 and will be depreciated over five years using the straight-line method. The remodeled room will accommodate ten extra students per year. Each student pays annual tuition of $16,000. The before-tax incremental cost of a student (e.g., the cost of supplies and teacher's wages) is $2,000 per year. The company's tax rate is 40 percent, and the company requires a 12% rate of return on the remodeling project.
How much is the internal rate of return of the remodeling project?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M949131

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