Annual Rate of Return Question

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 Project Bono $174,400 Project Edge $190,750 Project Clayton $218,000 Capital investment Annual net income Year 1 15,260 15,260 15,260 15,260 15,260 $76,300 19,620 18,530 17,440 13,080 9,810 $78,480 29,430 25,070 22,890 14,170 13,080 $104,640 4 Total year.) 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