Brundage Laine Canine

Project A: Project B:

Cost of Project 503,924 1,899,113

Additional Revenue per year 977,080 1,651,623

Additional Expenses per year

(these expenses do NOT include depreciation expense) 870,310 1,085,000

Estimated Life 8 6

Residual Value 14,720 15,391

Cost of Capital 12% 18%

additional information: All of the revenue will be received and all of the expenses will be paid by year-end The straight line depreciation method is used.

Report:

Compute the cash payback period, the ARR, and the NPV of each project.

Compute the excess present value index for each project.

Disregarding residual value, what is the approximate IRR for each project?

Describe the advantages and limitations of evaluating projects using these three methods of capital budgeting: cash payback analysis, ARR, and NPV.

Which is the better project for your company? Describe your reasons for selecting this project.

*please show me step by step on how you retrieved each answer. Thank you.