Question
Henkel 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
Henkel 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.
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Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
Instructions
(a) | Compute the cash payback period for each project. (Round to two decimals.) |
(b) | Compute the net present value for each project. (Round to nearest dollar.) |
(c) | Compute the annual rate of return for each project. (Round to two decimals.) (Hint: Use average annual net income in your computation.) |
(d) | Rank the projects on each of the foregoing bases. Which project do you recommend? |
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