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The Stenny and Homer partnership is considering three long-term capital investment proposals. Each investment has...

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Accounting

The Stenny and Homer partnership 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.
Capital investment
Project Fix $142,500
Project Marl
Project Crank
$165,000
$195,000
Annual net income:
Year 1
$9,000
$12,500
$ 19,000
2
3
4
5
9,000
12,000
15,000
9,000
11,000
14,000
9,000
8,000
9,000
9,000
6,000
8,000
Total
$ 45,000
$49,500
$65,000
Depreciation is computed by the straight-line method with no salvage value. The company's cost
of capital is 12%. (Assume cash flows occur evenly throughout the year.)
Instructions
(a) Compute the net present value for each project.
(b) Compute the annual rate of return for each project.

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