Cullumbers Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,660. Each project will last for 3 years and produce the following net annual cash flows.

Year

AA

BB

CC

1

$7,210

$10,300

$13,390

2

9,270

10,300

12,360

3

12,360

10,300

11,330

Total

$28,840

$30,900

$37,080

The equipments salvage value is zero, and Cullumber uses straight-line depreciation. Cullumber will not accept any project with a cash payback period over 2 years. Cullumbers required rate of return is 12%. Click here to view the factor table. (a) Compute each projects payback period. (Round answers to 2 decimal places, e.g. 15.25.)

AA

enter a number of years rounded to 2 decimal places

years

BB

enter a number of years rounded to 2 decimal places

years

CC

enter a number of years rounded to 2 decimal places

years

Which is the most desirable project?

The most desirable project based on payback period isselect a project Project AAProject BBProject CC

Which is the least desirable project?

The least desirable project based on payback period isselect a project Project BBProject AAProject CC

(b) Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answers to the nearest whole dollar, e.g. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

AA

enter a dollar amount

BB

enter a dollar amount

CC

enter a dollar amount

Which is the most desirable project based on net present value?

The most desirable project based on net present value is select a project Project CCProject AAProject BB.

Which is the least desirable project based on net present value?

The least desirable project based on net present value is select a project Project BBProject CCProject AA.