Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used (Future Value of $1 Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided.) Project 1: Retooling Manufacturing Facility This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,000,000 Project 2: Purchase Patent for New Product The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate $425,000 additional annual net income for Hearne. Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,000, Purchasing the fleet would allow Hearne to expand its customer territory resulting in $200,000 of additional net income per year. Required: 1. Determine each project's accounting rate of return. 2. Determine each project's payback period 3. Using a discount rate of 10 percent, calculate the net present value of each project 4. Determine the profitability index of each project and prioritize the projects for Hearne Required 1 Required 2 Required 3 Required 4 Determine each project's accounting rate of retur. (Round your answers to 2 decimal places.) Accounting Rate of Return 7.91% Project 1 Project 2 Project 3 12.50% % will will Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine each project's payback period. (Round your answers to 2 decimal places.) Payback Period years Project 1 Project 2 Project 3 years years Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Using a discount rate of 10 percent, calculate the net present value of each project. (Round yo 4 decimal places and final answers to 2 decimal places.) Net Present Value Project 1 Project 2 Project 3 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required Rank Determine the profitability index of each project and prioritize the projects for Hearne. (Round your intermediate calculations to 2 decimal places. Round your final answers to 4 decimal places.) Profitability Index Project 1 Project 2 Project 3 (Required a TABLE 11.1A Future Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0 1.0000 10000 10000 10000 10000 10000 10000 1.0000 1.0000 1 10200 10300 1,0375 10400 10425 10500 10600 10700 10800 2 1.0404 10609 10764 10816 10868 11025 11236 11449 11664 3 10612 1.0927 11168 11249 11330 1.1576 11910 12250 12597 4 1.0824 11255 11587 11699 11811 12155 12625 13108 13605 140264693 5 11041 11593 1.2021 1.2167 12313 12763 13382 6 11262 1.1941 12472 12653 12837 13401 14185 1.5007 15869 7 11487 12299 12939 13159 13382 14071 15036 16058 17138 8 11717 12668 13425 13686 13951 14775 15938 1.7182 1.8509 9 1.1951 13048 13928 14233 1.4544 15513 16895 18385 19990 10 12190 13439 1.4450 14802 1.5162 16289 17906 19672 2.1589 20 14859 18061 20882 2.1911 2 2989 26533 32071 3.8697 4.6610 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 0 10000 10000 10000 10000 10000 10000 10000 10000 10000 1 10900 11000 11100 11200 11300 11400 11500 12000 12500 2 1.1881 12100 1 2321 12544 12769 12996 13225 14400 15625 3 1.2950 1.3310 13676 1.4049 14429 14815 1.5209 17280 19531 4 14116 1.4641 15181 15735 16305 16890 17490 20736 24414 5 1.5386 16105 16851 17623 18424 19254 20114 24883 30518 6 16771 17716 1.8704 1.9738 20820 21950 23151 29850 3.8147 7 1.8280 19487 2.0762 22107 23526 25023 26600 3.5832 47684 8 19926 21436 23045 24760 26584 2.8526 30590 4.2998 5.9605 9 2.1719 23579 2.5580 2.7731 30040 3.2519 3.5179 51598 7.4506 10 23674 2.5937 28394 31058 33946 3707240456 61917 9 3132 56044 6.7275 80623 96463115231137435 16 3665 38 3376 86 7362 20 TABLE 11.2A Present Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 1 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 09259 2 0.9612 0.9426 0.9290 0.9246 0.9201 0.9070 08900 0.8734 0.8573 3 0.9423 0.9151 0.8954 0.889008826 0.8638 0.8396 0.8163 0.7938 4 0.9238 0.8885 0.8631 08548 0.8466 0.8227 0.7921 07629 07350 5 0.9057 0.8626 0.8319 08219 0.8121 07835 0.7473 0.7130 0.6806 6 0.8880 0.8375 08018 07903 07790 0.7462 07050 06663 0.6302 7 0.8706 0.8131 077280759907473 0.7107 0.6651 0.6227 05835 8 0.8535 07894 0.7449 07307 07168 0.6768 06274 0.5820 0.5403 9 08368 0.7664 07180 07026 06876 0.6446 0.5919 0.5439 0.5002 10 0.8203 0.7441 06920 06756 06595 0.6139 0.5584 0.5083 0.4632 20 0.6730 0.5537 0.4789 0.4564 0.4350 0.3769 0.3118 0.2584 0.2145 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 0.9174 0.9091 0.9009 08929 0.8850 08772 0.8696 0.8333 0.8000 2 0.8417 0.8264 0.8116 0.7972 07831 0.7695 0.7561 0.6944 0.6400 3 0.7722 07513 07312 0.7118 016931 0.6750 0.6575 0.57870.5120 4 0.7084 0.6830 0.6587 016355 0.6133 0.5921 0.5718 0.4823 04096 5 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 014972 0 4019 0.3272 6 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 0.2621 7 0.5470 0.5132 0.4817 04523 04251 0.3996 013759 0.2791 012097 8 0.5019 0.4665 04339 04039 013752 013506 0.5269 2326 0.1678 9 04604 04241 0.3909 013506 018329 013075 0284301938 01342 10 0.4224 0.3855 0.3522 03220 029460 2597 02472 0.1615 01074 20 1784 n 1486 1240 01032 868728611 012 TABLE 11.3A Future Value of an Annuity of $1 64 4.25% 5% 7% 8% Periods 2% 3,75% 4% 3% 10000 1.0000 10000 10000 10000 10000 10000 10000 10000 2.0500 20600 20800 20400 2.0425 20700 20200 20300 20375 2 3.1525 3 1836 312149 31293 32464 3 30604 131216 3.0909 31139 43101 4.3746 4.5061 42623 44399 4 4 1836 4.2465 4.1216 4.2307 5.5256 57507 5.8666 5.6371 5 52040 5.3893 5.3091 5/4163 5.4434 6.9753 71533 73359 6.8019 6 6/3061 6,4684 6.6748 6.5914 66330 86540 819228 17 74343 83938 76625 7.8386 81420 29585 78983 9.8975 10.6366 9.5491 10.2598 8 8.5830 8.8923 92142 91326 9.2967 119780 12 4876 9 114913 97546 101591 10.4750 10.5828 10.6918 11.0266 13.8164 10 14.4866 109497/11.4639 11.8678 13.1808 12 1462 125779 12.0061 20 24 2974 268704 290174 29.7781 305625 330660 367856 40 9955 45 7620 Periods 15% 20% 25% 99 10% 11% 12% 13% 14% 10000 1 10000 10000 10000 10000 10000 10000 10000 10000 2 2500 2 20900 21000 21100 2.1400 21200 2 2000 21300 21500 3 314225 36400 3 2781 38125 33100 34069 33421 3.3744 3.4396 4 4.5731 46410 47097 5.7656 47793 4 8498 419211 49934 5 3680 61051 6 2278 5 9847 6.3528 54803 5 6.6101 67424 74410 82020 6 7.9129 75233 81152 82532 77156 8.8227 99299 85355 112588 12.9159 0239 7 110668 9 2004 94872 97833 10.089004042167305 130266 8 118594 16/4991 12 2997127573132328 198419 110285 11.4359 9 10 13.0210 13 5975 14.1640 14.7757 15/4157 16.0853 16.7856 202989 258023 15.1929 15.9374 16.7220 175487 18.4197 19.3373 20.3037 25.958723 2529 511601 57.2750 64 2028 72.0524 809468 910249 102.4436 1866880 342 9447 20 M table11_43.JPG 66 TABLE 11.4A Present Value of Annuity of $1 Periods e 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 1 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 2 1.9416 19135 1.8929 1.8861 18794 1.8594 1.8334 1.8080 17833 3 2.8839 2.8286 27883 2.5771 2.7751 27620 27232 26730 26243 3,6299 3.6086 3.5460 3.4651 3.3872 4 3 8072 3.7171 3.6514 3.3121 5 4 7135 4.5797 4.4833 4.4518 4.4207 4.3295 42124 4.1002 39927 5.6014 5.4172 5.2851 5 2421 5.1997 5:0757 4.9173 47665 4.6229 7 6.4720 62303 6.0579 6.0021 5.9470 5.7864 5.5824 5.3893 5 2064 8 73255 7,0197 6.8028 6.7327 6.6638 6.4632 6.2098 5.9713 5.7466 9 8.1622 77861 7.5208 74353 7.3513 71078 6.8017 6.5152 6 2469 10 8.9826 8.5302 8,2128 8.1109 8.0109 77217 7.3601 7.0236 6.7101 20 16 3514 14.8775 13.8962 13.5903 13.2944 12.4622 11.4699 10.5940 9.8181 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 0.9174 0.9091 09009 0.89290.8550 0.8772 0.8696 08333 0.8000 17591 17355 1.7125 16901 1.6681 1.6467 16257 15278 14400 3 2.5313 2.4869 24437 2.4018 23612 2 3216 2283221065 19520 4 32397 3.1699 3.1024 3.0373 29745 29137 28550 2.5887 2.3616 5 3.8897 3.7908 36959 36048 3.5172 3.4331 3,3522 2.9906 2.6893 6 144859 4,3553 42305 4.1114 $ 9975 3.8887 3.7845 33255 2.9514 7 50330 4.8684 47122 4.5638 4.4226 4.2883 41604 3.5046 3.1611 00 55348 5,3349 51461 4.9676 14.7988 46089 4.4873 3.8972 310289 9 5.9952 5.7590 55670 5.3282 5.1312 4.9464 47716 4.0310 3.4631 10 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 50188 419253.5705 20 9.1285 8.5136 79633 74694 70248 6.62362593 48696 3.9539