70.2K

Verified Solution

Link Copied!

Problem 25-01A U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $171,200 $187,250 $208,000 Annual net income: Year 1 14,980 19,260 28,890 2 14,980 18,190 24,610 3 14,980 17,120 22,470 4 14,980 12,840 13,910 5 14,980 9,630 12,840 Total $74,900 $77,040 $102,720 Depreciation is computed by the straight-line method with no salvage value. The companys cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table.

Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono enter the cash payback period in years rounded to 2 decimal places years Project Edge enter the cash payback period in years rounded to 2 decimal places years Project Clayton enter the cash payback period in years rounded to 2 decimal places years Link to Text Link to Video

Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Project Bono Project Edge Project Clayton Net present value $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places Link to Text Link to Video

Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50%.) Project Bono Project Edge Project Clayton Annual rate of return enter percentages rounded to 2 decimal places % enter percentages rounded to 2 decimal places % enter percentages rounded to 2 decimal places % Link to Text Link to Video

Rank the projects on each of the foregoing bases. Which project do you recommend? Project Cash Payback Net Present Value Annual Rate of Return Bono select a ranking number

select a ranking number

select a ranking number

Edge		select a ranking number

select a ranking number

select a ranking number

Clayton		select a ranking number

select a ranking number

select a ranking number

The best project is select a project

.

Click if you would like to Show Work for this question:

Open Show Work

Answer & Explanation Solved by verified expert

See Answer