Question
Cullumber Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment $ 400000 $ 600000
CullumberCompany is considering two capital investment proposals. Estimates regarding each project are provided below:
| Project Soup | Project Nuts | |
| Initial investment | $400000 | $600000 |
| Annual net income | 10000 | 26000 |
| Net annual cash inflow | 88000 | 111000 |
| 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 | 3.89 | 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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Horngrens Financial and Managerial Accounting
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
4th Edition
978-0133251241, 9780133427516, 133251241, 013342751X, 978-0133255584
