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. Project 1: Retooling Manufacturing Facility This project would require an initial investment of $5,650,000. It would generate $1,009,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,192,000. Project 2: Purchase Patent for New Product The patent would cost $3,960,000, which would be fully amortized over five years. Production of this product would generate $811,800 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 $195,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $6,600 Purchasing the fleet would allow Hearne to expand its customer territory resulting in $999,380 of additional net income per year. Required 1. Determine each project's accounting rate of return. (Round your answers to 2 decimal places.) Project 1 Project 2 Project 3 Accounting Rate of Return 7.991 % (8.031 % 2. Determine each project's payback period. (Round your answers to 2 decimal places.) Project 1 Project 2 Project 3 Payback Period Years Years Years 3. Using a discount rate of 10 percent, calculate the net present value of each project. (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. Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.) Net Present Value Project 1 Project 2 Project 3 4. 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 Rank Project 1 Project 2 Project 3 The following information applies to the questions displayed belowJ Falcon Crest Aces (FCA). Inc., is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Various information about the proposed investment follows Initial investment Useful life Salvage value Annual net income generated FCA's cost of capital $270,000 10 years 25,000 $ 6,000 8% Assume straight line depreciation method is used. valuc: Required information 3.57 points Required: Help FCA evaluate this project by calculating each of the following: 1. Accounting rate of return. (Round your answer to 2 decimal places.) ting Rate of Return 3. value 3.57 points 2. Payback period. (Round your answer to 2 decimal places.) Payback Period years valuc: 3.57 points Required information sent value (NPV). (Future Value of $1, Present Value 3. Net pre of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) value Required information 3.57 points 4. Recalculate FCA's NPV assuming the cost of capital is 3% percent. (Future Value of $1. Present Value of $1. Future Value Annuity of $1 Present Value Annuity $1 ) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar amount.) t Present Value Citco Company is considering investing up to $714,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training center in an underserved community, providing jobs and economic security for the local community. Required: 1. Assuming the cost of capital is 8%, complete the table below by computing the payback period, NPV, Profitability Index, and Internal Rate of Return u re a u o Pres value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Negative amount should be indicated by minus sign. Round your "NPV" answers to whole nearest dollar amounts. Round your "PI" and "IRR" answers to 2 decimal places.) Project A Redesign production process) $ (714,000) Project B Project C Remodel office building) (New training facility) S (396,000) Required Investment Annual Cost Savings Project Life Salvage Value Payback Period NPV @ 8% Profitability index @ 8% Internal Rate of Return $ (656,000) 119,000 82,000 99,000 8 years 10 years 6 years 90,000 78,000 32,000 years years years