3.57 points 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 o $5,550,000 would generate S991 00 n addi io al net cash flow each year. The new machinery has a useru fe eight years and a savage alue 6.000 Project 2: Purchase Patent for New Product The patent would cost $3,890,000, which would be fully amortized over five years. Production of this product would generate $758,550 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 $185,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $6,400. Purchasing the fleet would allow Hearne to expand its customer territory resuting in $901,900 of additional net income per year. Required: 1. Determine each project's accounting rate of retum. (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.) Project 1 Project 2 Project 3 Payback Period Years Years Years 3. Using a discount rate of 10 percent, calculate the net present value of each project. (Future Value of $1, Present Value of $1, from the tables provided. Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.) Present Value Annuity of $1.) (Use appropriate factor(s) 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 The following infomation applies to the questions aisplayed below.) Falcon Crest Aces (FCA) Inc., is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Various information about the proposed investment follows: $180,000 Initial investment Usetul life Salvage value Annual net income generated FCA's cost of capital 0 years 20,000 $4,200 6% Assurme straight line depreciation method is used. Required information 3.57 points Required: Help FCA evaluate this project by calculating each of the following 1. Accounting rate of retum. (Round your answer to 2 decimal places.) nting Rate of Return Citco Company is considering investing up to $485,000 in a sustainability-anhancing project. Its managers have narrowed their choices to three potential projects. Project A would redesign the production procass to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. Project B would remodel an office building, utllizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training center in an underserved community, providing jobs and economic security for the local community. Required 1 Assuming the cost of capital is 10%, complete the table below by computing the payback period.N Profitability Index and internal Rate of Return Future Value o S1 Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Negative amount should be indicated by minus sign. Round your "NPV" answers to whole nearest dollar amounts. Round your "PI" and "IRR" answers to 2 decimal places.) Project B Project C Project A Redesign production Remodel office building) New training facility) Required Investment Annual Cost Savings Project Life Salvage Value Payback Period NPV @ 10% Profitability Index @ 10% Internal Rate of Return S(485,000) $(522.000) S (340,000) 97,000 85,000 8 years 10 years 6 years 70,000 39,000 years years years 2. Based strictly on the economic analysis, in which project should they invest? Project A Project B ,--, Project C