Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight linedepreciation method is used.Project 1: Retooling Manufacturing FacilityThis project would require an initial investment of $4,950,000. It would generate $883,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,024,000.Project 2: Purchase Patent for New ProductThe patent would cost $3,470,000, which would be fully amortized over five years. Production of this product would generate $468,450 additional annual net income for HearneProject 3: Purchase a New Fleet of Delivery TrucksHearne could purchase 25 new delivery trucks at a cost of $125,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,200. Purchasing the fleet would allowHearne to expand its customer territory resulting in $421,900 of additional net income per year.Required:1. Determine each project's accounting rate of return. (Round your answers to 2 decimal places.)Accounting Rate of ReturnProject 1Project 2Project 32. Determine each project's payback period. (Round your answers to 2 decimal places.)Payback PeriodProjectYeProject 2YearsProject 3Years3 lsinc a discount rate of 10 nercent caleulate the net present value of aach nroiect (Euture Vlalue of 1 Drasent ValuA of $1 Euture Value Annuity of$1 Dresent Value Apnuity of $1Use annronriate factorle 3. Using a discount rate of 10 percent, calculate the net present value of each project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s)from the tables provided. Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.)Net Present ValueProject 1Project 2Project 34. Determine the profitability index of each project and prioritize the projects for Hearne. (Round your intermediate calculations to 2 decimal places. Round your final answers to 4 decimal places.)Profitability IndexRankProject 1Project 2Project 3

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Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line
depreciation method is used.
Project 1: Retooling Manufacturing Facility
This project would require an initial investment of $4,950,000. It would generate $883,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,024,000.
Project 2: Purchase Patent for New Product
The patent would cost $3,470,000, which would be fully amortized over five years. Production of this product would generate $468,450 additional annual net income for Hearne
Project 3: Purchase a New Fleet of Delivery Trucks
Hearne could purchase 25 new delivery trucks at a cost of $125,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,200. Purchasing the fleet would allow
Hearne to expand its customer territory resulting in $421,900 of additional net income per year.
Required:
1. Determine each project's accounting rate of return. (Round your answers to 2 decimal places.)
Accounting Rate of Return
Project 1
Project 2
Project 3
2. Determine each project's payback period. (Round your answers to 2 decimal places.)
Payback Period
Project
Ye
Project 2
Years
Project 3
Years
3 lsinc a discount rate of 10 nercent caleulate the net present value of aach nroiect (Euture Vlalue of 1 Drasent ValuA of $1 Euture Value Annuity of$1 Dresent Value Apnuity of $1
Use annronriate factorle
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Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. Project 1: Retooling Manufacturing Facility This project would require an initial investment of $4,950,000. It would generate $883,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,024,000. Project 2: Purchase Patent for New Product The patent would cost $3,470,000, which would be fully amortized over five years. Production of this product would generate $468,450 additional annual net income for Hearne Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $125,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,200. Purchasing the fleet would allow Hearne to expand its customer territory resulting in $421,900 of additional net income per year. Required: 1. Determine each project's accounting rate of return. (Round your answers to 2 decimal places.) Accounting Rate of Return Project 1 Project 2 Project 3 2. Determine each project's payback period. (Round your answers to 2 decimal places.) Payback Period Project Ye Project 2 Years Project 3 Years 3 lsinc a discount rate of 10 nercent caleulate the net present value of aach nroiect (Euture Vlalue of 1 Drasent ValuA of $1 Euture Value Annuity of$1 Dresent Value Apnuity of $1 Use annronriate factorle

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3. Using a discount rate of 10 percent, calculate the net present value of each project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s)
from the tables provided. Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.)
Net Present Value
Project 1
Project 2
Project 3
4. Determine the profitability index of each project and prioritize the projects for Hearne. (Round your intermediate calculations to 2 decimal places. Round your final answers to 4 decimal places.)
Profitability Index
Rank
Project 1
Project 2
Project 3
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3. Using a discount rate of 10 percent, calculate the net present value of each project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.) Net Present Value Project 1 Project 2 Project 3 4. Determine the profitability index of each project and prioritize the projects for Hearne. (Round your intermediate calculations to 2 decimal places. Round your final answers to 4 decimal places.) Profitability Index Rank Project 1 Project 2 Project 3

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