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Compute the annual rate of return for each project. ( Hint: Use average annual net income in your computation.) U3 Company is considering three long-term
Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.)
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 Project Edge Project Clayton Capital investment $171,200 $187,250 $202,000 Annual net income: 14,980 19,260 Year 1 28,890 24,610 14,980 18,190 22,470 14,980 17,120 14,980 12,840 13,910 12,840 9,630 14,980 Total $74,900 $77,040 $102,720 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 year.)
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