Mako Corporation is considering two long-term capital investment proposals. Relevant data on each project are as follows.

			Project
			Brown	Red
	Capital investment		$249,400	$189,610
	Annual net income:
	Year	1	26,152	25,425
		2	24,312	16,323
		3	23,239	13,021
		4	17,104	10,067
		5	20,093	8,472
		Total	$ 110,900	$73,308

Depreciation is computed by the straight-line method with no salvage value. The companys minimum rate of return is the companys cost of capital which is 12%. Assume cash flows occur evenly throughout the year

Instructions:

Compute the following and rank the projects for each category:

Compute the average annual rate of return for each project. (Round your answers to 1 decimal place.)

Compute the cash payback period for each project. (Round your answers to 2 decimal places.)

Compute the net present value for each project. (Round your answers to 0 decimal places.)

Rank the projects on each of the foregoing bases. Which project do you recommend and WHY?