OFCOCumOriole Company is considering two capital investment proposals. Estimates regarding each project are provided below:Initial investmentAnnual net incomeNet annual cash inflowEstimated useful lifeSalvage valuePeriods5Project Soup$400000480001240005 years0The company requires a 10% rate of return on all new investments.Present Value of an Annuity of 110%12%9%62%.12.0%,24%Ⓒ31,0%11%3.893.791 3.696 3.6054.486 4.355 4.231 4.111The annual rate of return for Project Soup isProject Nuts$600000640001550006 years0

Annual Rate of Return (ARR) refers to the percentage rate of return expected on initial investment…

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The annual rate of return for Project Soup is 62% 12.0% 24% Ⓒ31.0%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

OF
CO
Cum
Oriole Company is considering two capital investment proposals. Estimates regarding each project are provided below:
Initial investment
Annual net income
Net annual cash inflow
Estimated useful life
Salvage value
Periods
5
Project Soup
$400000
48000
124000
5 years
0
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
10%
12%
9%
62%.
12.0%,
24%
Ⓒ31,0%
11%
3.89
3.791 3.696 3.605
4.486 4.355 4.231 4.111
The annual rate of return for Project Soup is
Project Nuts
$600000
64000
155000
6 years
0

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