Question
Crane 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
Crane 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 | $ 164,000 | $ 180,500 | $ 204,000 | ||||
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 the factor table.
Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Project Bono | enter a number of years rounded to 2 decimal places | years | |
---|---|---|---|
Project Edge | enter a number of years rounded to 2 decimal places | years | |
Project Clayton | enter a number of years rounded to 2 decimal places | years |
eTextbook and Media
Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Project Bono | Project Edge | Project Clayton | |||||
---|---|---|---|---|---|---|---|
Net present value | $ enter a dollar amount rounded to 0 decimal places | $ enter a dollar amount rounded to 0 decimal places | $ enter a dollar amount rounded to 0 decimal places |
eTextbook and Media
Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50%.)
Project Bono | Project Edge | Project Clayton | |||||
---|---|---|---|---|---|---|---|
Annual rate of return | enter percentages rounded to 2 decimal places % | enter percentages rounded to 2 decimal places % | enter percentages rounded to 2 decimal places % |
eTextbook and Media
Rank the projects on each of the foregoing bases. Which project do you recommend?
Project | Cash Payback | Net Present Value | Annual Rate of Return | ||||
---|---|---|---|---|---|---|---|
Bono | select a rank 132 | select a rank 231 | select a rank 321 | ||||
Edge | select a rank 132 | select a rank 123 | select a rank 123 | ||||
Clayton | select a rank 132 | select a rank 123 | select a rank 123 |
The best project is select a project BonoEdgeClayton. |
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