Homework Help is Here – Start Your Trial Now!
Business
Economics
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?

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter27: Investment, The Capital Market, And The Wealth Of Nations
Section: Chapter Questions
Problem 9CQ
See similar textbooks
icon
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?
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
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Government Revenue
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.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Managerial Economics: Applications, Strategies an…
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Exploring Economics
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS