Subject - Acounting Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,840. Eachproject will last for 3 years and produce the following net annual cash flows.Year12AAAABBBB10,980314,640Total $34,160 $36,600CC$8,540 $12,200 $15,86014,64013,42012,20012,200The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash paybackperiod over 2 years. Doug's required rate of return is 12%. Click here to view the factor table.(a)CCCompute each project's payback period. (Round answers to 2 decimal places, eg. 15.25.)$43,920Which is the most desirable project?yearsyearsyearsThe most desirable project based on payback period is Which is the most desirable project?The most desirable project based on payback period isWhich is the least desirable project?The least desirable project based on payback period is(b)Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 orparentheses e.g. (45). Round final answers to the nearest whole dollar, eg. 5,275. For calculation purposes, use 5 decimal places as displaythe factor table provided.)AABBCCWhich is the most desirable project based on net present value?The most desirable project based on net present value isWhich is the least desirable project based on net present value?The least desirable project based on net present value is

Year Cash flows of AA Cash flows of BB Cash flows of CC 0 $ -26,840.00 $…

Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,840. Each project will last for 3 years and produce the following net annual cash flows. Year 1 2 3 AA AA BB CC $8,540 $12,200 10,980 BB 14,640 Total $34,160 $36,600 12,200 12,200 cc $15,860 14,640 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. (a) Compute each project's payback period. (Round answers to 2 decimal places, eg.15.25.) 13,420 $43,920 years years years

Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,840. Each project will last for 3 years and produce the following net annual cash flows. Year 1 2 3 AA AA BB CC $8,540 $12,200 10,980 BB 14,640 Total $34,160 $36,600 12,200 12,200 cc $15,860 14,640 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. (a) Compute each project's payback period. (Round answers to 2 decimal places, eg.15.25.) 13,420 $43,920 years years years

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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