U3 Company is considering three long-term capital investment proposals. Each investment has a useful life...
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Accounting
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
$172,800
$189,000
$214,000
Annual net income:
Year 1
15,120
19,440
29,160
2
15,120
18,360
24,840
3
15,120
17,280
22,680
4
15,120
12,960
14,040
5
15,120
9,720
12,960
Total
$75,600
$77,760
$103,680
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 PV table.
(a)
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Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Project Bono
years
Project Edge
years
Project Clayton
years
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(b)
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.)
