Question
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment $270,000 $600,000 Annual net
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
|
| Project Soup | Project Nuts |
| Initial investment | $270,000 | $600,000 |
| Annual net income | 27,000 | 45,000 |
| Net annual cash inflow | 90,000 | 142,000 |
| Estimated useful life | 5 years | 6 years |
| Salvage value | -0- | -0- |
The company requires a 10% rate of return on all new investments.
|
|
| Present Value of an Annuity of 1 |
|
| Periods | 9% | 10% | 11% | 12% |
|
| 5 | 3.890 | 3.791 | 3.696 | 3.605 |
|
| 6 | 4.486 | 4.355 | 4.231 | 4.111 |
The annual rate of return for Project Soup is?
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Accounting
Authors: Carl S. Warren, James M. Reeve, Philip E. Fess
20th Edition
0324025424, 978-0324025422
