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Blossom 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
Blossom 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 | Project Edge | Project Clayton | |||||
---|---|---|---|---|---|---|---|
Capital investment | $164,800 | $180,250 | $206,000 | ||||
Annual net income: | |||||||
Year 1 | 14,420 | 18,540 | 27,810 | ||||
2 | 14,420 | 17,510 | 23,690 | ||||
3 | 14,420 | 16,480 | 21,630 | ||||
4 | 14,420 | 12,360 | 13,390 | ||||
5 | 14,420 | 9,270 | 12,360 | ||||
Total | $72,100 | $74,160 | $98,880 |
Depreciation is computed by the straight-line method with no salvage value. The companys cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table.
(a)
Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Project Bono | enter the cash payback period in years rounded to 2 decimal places | years | |
---|---|---|---|
Project Edge | enter the cash payback period in years rounded to 2 decimal places | years | |
Project Clayton | enter the cash payback period in years rounded to 2 decimal places | years |
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