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*** ONLY PART C ** The Three Stages partnership is considering three long-term capital investment proposals. Each investment has a useful life of five years.

*** ONLY PART C **

The Three Stages partnership is considering three long-term capital investment proposals. Each investment has a useful life of five years. Relevant data on each project are as follows:

Project Main Project Odyssey Project Duo
Capital investment: $163,500 $174,400 $204,000
Annual net income:
Year 1 $14,170 $19,620 $29,430
2 14,170 18,530 23,980
3 14,170 17,440 22,890
4 14,170 13,080 14,170
5 14,170 9,810 13,080
Total $70,850 $78,480 $103,550

Depreciation is calculated by the straight-line method and there is no salvage value. The companys cost of capital is 15%. (Use average net annual cash flows in your calculations.)

(a)

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Calculate the cash payback period for each project. (Round answers to 2 decimal places, e.g. 15.25.)

Payback period
Project Main 3.49 years
Project Odyssey 3.30 years
Project Duo 3.10 years

Attempts: 1 of 1 used

(b)

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Calculate the net present value for each project. (If the answer is negative, use either a negative sign preceding the number e.g. -5,275 or parentheses e.g. (5,275). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Click here to view PV table.

Net present value
Project Main $ 6384
Project Odyssey $ 2581
Project Duo $ 6147

Attempts: 1 of 1 used

(c)

Calculate the annual rate of return for each project. (Round answers to 2 decimal places, e.g. 15.25%.)

Annual rate of return
Project Main %
Project Odyssey %
Project Duo %

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