Ivanhoes Custom Construction Company is considering three new projects, each requiring an equipment investment of $25,300. Each project will last for 3 years and produce the following net annual cash flows.

Year		AA		BB		CC
1		$8,050		$11,500		$14,950
2		10,350		11,500		13,800
3		13,800		11,500		12,650
Total		$32,200		$34,500		$41,400

The equipments salvage value is zero, and Ivanhoe uses straight-line depreciation. Ivanhoe will not accept any project with a cash payback period over 2 years. Ivanhoes 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 is

select a project Project AAProject BBProject CC

Which is the least desirable project?

The least desirable project based on payback period is

select 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 AAProject BBProject CC.