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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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