Modern Refurbishing Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a
1 answer:
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Answer: $20,000
Explanation:
Given that,
Singer's original capital = $40,000
McMann's original capital = $60,000
Singer's salary = $12,000
McMann's salary = $18,000
Interest on original capital = 10%
Profit sharing ratio = 3:2
Income of the year = $30,000
McMann's share of the income:
Salary = $18,000
Interest = $6,000
Singer's share of the income:
Salary = $12,000
Interest = $4,000
Therefore,
Remainder = $30,000 - $40,000
= -$10,000
Hence, remainder will be divided among these two partners in 3:2 ratio.
So,
McMann's share of remainder =
= -$4,000
Therefore, McMann's share of the income:
= Salary + Interest + remainder
= $18,000 + $6,000 + (-$4,000)
= $20,000