(c)Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to2 decimal places, eg. 10.50%)Annual rate of returnProject Bono%6Project Edge96Project Clayton% U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant dataon each project are as follows.Capital investmentAnnual net income:Year 1234TotalProject Bono$163,20014,28014,28014,28014,28014,280$71,400Project Edge Project Clayton$178,500$204,00018,36017,34016,32012,2409,180$73,44027,54023,46021,42013,26012,240$97,920Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cashFlows occur evenly throughout the year.)

Annual rate of return = Average annual income / Average investmentwhere,Average annual income =…

Answered: U3 Company is considering three…

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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Projects A and B have first costs of $5,000 and $9,000 respectively. Project A has net annual benefits of $2,500 during each year of its 5-year useful life, after which it can be replaced identically. • Project B has net annual benefits of $3,300 during each year of its 10-year life. Use present worth analysis, an interest rate of 30% per year, and a 10-year analysis period to determine which project to select. Project A Project B
You are evaluating three mutually exclusive public-works projects with the respective costs and benefits included in the table below. The useful life of each of the projects is 30 years and MARR is 12% annually. Should any of the projects be selected? (Hint: use incremental B-C Analysis) A B C Capital Investment $10,500,000 $12,000,000 $14,000,000 Annual Operating and Maintenance Costs $850,000 $925,000 $930,000 Market Value $1,350,000 $1,950,000 $2,100,000 Annual Benefit $2,250,000 $2,565,000 $2,700,000
You have been offered a project paying $300 at the beginning of each year for the next 20 years. What is the maximum amount of money you would invest in this project if you require 9 percent rate of return to your investment? OA. $2,739 B. $2,985 C. $15,348 OD. $16,729
Determine the average rate of return for a project that is estimated to yield total income of $269,760 over four years, cost $511,000, and has a $51,000 residual value. fill in the blank %
IRR A project has an initial cost of $55,000, expected net cash inflows of $11,000 per year for 10 years, and a cost of capital of 10%. What is the project's IRR? Round your answer to two decimal places. %
Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows: MaintenanceEquipment RampFacilities ComputerNetwork Amount to be invested $614,361 $418,741 $186,316 Annual net cash flows: Year 1 318,000 229,000 134,000 Year 2 296,000 206,000 92,000 Year 3 270,000 183,000 67,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use…
The Company has three potential projects from which to choose. Selected information on each of the three projects follows: Project A Project B Project C Investment required $44,400 $55,700 $53,100 Net present value of project $49,100 $74,100 $69,100 Using the profitability index, rank the projects from most profitable to least profitable. A, B, C B, A, C B, C, A C, B, A
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Determine the average rate of return for a project that is estimated to yield total income of $356,400 over 4 years, costs $601,000, and has a $59,000 residual value.%
Calculate the IRR for the picture enclosed
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 Capital investment Annual net income: (a) Year 1 2 3 4 5 Total ow Transcribed Text Project Bono $160,000 Project Bono 14,000 Project Edge 14,000 Project Clayton 14.000 ow Transcribed Text 14,000 Your answer is incorrect. 14,000 $70,000 Project Edge Project Clayton $175,000 $200,000 18,000 17,000 16,000 12,000 9,000 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15% (Assume that cash $72,000 O Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table. years Compute the cash payback period for each project. (Round answers to 2 decimal places, eg years C years 27,000 23,000 9 21.000 13,000 C 12,000 $96,000 1.50.) (b) The parts…
Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows: Line Item Description Maintenance Equipment Ramp Facilities Computer Network Amount to be invested $551,372 $327,621 $172,660 Annual net cash flows: Year 1 277,000 186,000 125,000 Year 2 258,000 167,000 86,000 Year 3 235,000 149,000 63,000 Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required,…

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