P24-1A 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. Compute annual rate of re cash payback, and net pres value. Capital investment Annual net income: Year 1 Project Bono $160,000 Project Edge $175,000 Project Clayton $200,000 (LO 1, 2, 5), AN 14,000 14,000 14,000 14,000 14,000 18,000 17,000 16,000 12,000 9,000 27,000 23,000 21,000 13,000 12,000 2 EXLS 3 4 5 Total $ 70,000 $ 72,000 $ 96,000 Depreciation is computed by the straight-line method with no salvage value. The com- pany's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Instructions (a) Compute the cash payback period for each project. (Round to two decimals.) b) Compute the net present value for each project. (Round to nearest dollar.) (b) E $(7,312); C $2,163 24 Planning for Capital Investments (c) Compute the annual rate of return for each project. (Round to two decimals.) (Hint: Use average annual net income in your computation.) (d) Rank the projects on each of the foregoing bases. Which project do you recommend?
P24-1A 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. Compute annual rate of re cash payback, and net pres value. Capital investment Annual net income: Year 1 Project Bono $160,000 Project Edge $175,000 Project Clayton $200,000 (LO 1, 2, 5), AN 14,000 14,000 14,000 14,000 14,000 18,000 17,000 16,000 12,000 9,000 27,000 23,000 21,000 13,000 12,000 2 EXLS 3 4 5 Total $ 70,000 $ 72,000 $ 96,000 Depreciation is computed by the straight-line method with no salvage value. The com- pany's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Instructions (a) Compute the cash payback period for each project. (Round to two decimals.) b) Compute the net present value for each project. (Round to nearest dollar.) (b) E $(7,312); C $2,163 24 Planning for Capital Investments (c) Compute the annual rate of return for each project. (Round to two decimals.) (Hint: Use average annual net income in your computation.) (d) Rank the projects on each of the foregoing bases. Which project do you recommend?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
please answer all parts
![P24-1A U3 Company is considering three long-term capital investment proposals. Each Compute annual rate of return,
investment has a useful life of 5 years. Relevant data on each project are as follows.
cash payback, and net present
value.
Capital investment
Annual net income:
Year 1
Project Bono
$160,000
Project Edge
$175,000
Project Clayton
$200,000
(LO 1, 2, 5), AN
14,000
14,000
14,000
14,000
14,000
18,000
17,000
16,000
12,000
9,000
27,000
23,000
21,000
13,000
12,000
XLS
3
4
Total
$ 70,000
$ 72,000
$ 96,000
Depreciation is computed by the straight-line method with no salvage value. The com-
pany's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
Instructions
(a) Compute the cash payback period for each project. (Round to two decimals.)
(b) Compute the net present value for each project. (Round to nearest dollar.)
(b) E $(7,312); C S2,163
24 Planning for Capital Investments
(c) Compute the annual rate of return for each project. (Round to two decimals.) (Hint:
Use average annual net income in your computation.)
(d) Rank the projects on each of the foregoing bases. Which project do you recommend?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F449bc9cf-2ebc-4bf8-be52-b4dd6e47d4df%2Ff416af59-341c-4107-88df-3665c2b83583%2Farl527p_processed.jpeg&w=3840&q=75)
Transcribed Image Text:P24-1A U3 Company is considering three long-term capital investment proposals. Each Compute annual rate of return,
investment has a useful life of 5 years. Relevant data on each project are as follows.
cash payback, and net present
value.
Capital investment
Annual net income:
Year 1
Project Bono
$160,000
Project Edge
$175,000
Project Clayton
$200,000
(LO 1, 2, 5), AN
14,000
14,000
14,000
14,000
14,000
18,000
17,000
16,000
12,000
9,000
27,000
23,000
21,000
13,000
12,000
XLS
3
4
Total
$ 70,000
$ 72,000
$ 96,000
Depreciation is computed by the straight-line method with no salvage value. The com-
pany's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
Instructions
(a) Compute the cash payback period for each project. (Round to two decimals.)
(b) Compute the net present value for each project. (Round to nearest dollar.)
(b) E $(7,312); C S2,163
24 Planning for Capital Investments
(c) Compute the annual rate of return for each project. (Round to two decimals.) (Hint:
Use average annual net income in your computation.)
(d) Rank the projects on each of the foregoing bases. Which project do you recommend?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education