PA11-3 Comparing, Prioritizing Multiple Projects [LO 11-1, 11-2, 11-3, 11-6] 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 $5,600,000. It would generate $1,000,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1.180,000. Project 2: Purchase Patent for New Product The patent would cost $1.925,000, which would be fully aniorlized aver five years. Procluction of this product wouki generale 5795,000 additional arnual net income for Herme. Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $190,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $6,500. Purchasing the fleet would allow Hearne to expand its customer territory resulting in S950,000 of additional net income per year Required: 1. Determine each project's accounting rate of retum. (Round your answers to 2 decimal places.) Project 1 Project 2 Project Accounting Rate of Rotum 7.99 20.00 20.00% 2. Derlemine each project's payback period. (Round your answers to 2 decimal places.) Payback Period Project Project 2 Project 3 5.60 Years 2.50 Years 3.37 Years 3. Using a discount rate of 10 percent, calculate the net present value of each project. (Future Value of 31. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) intermediate calculations to 4 decimal places and final answers to 2 decimal places.) the tables provided. Round your Net Present Value Project Project 2 Project 3 4. Determine the profitability Index of each project and prioritize the projecte for Heame. (Round your intermediate calculations to 2 decimal places. Round your final answers to 4 decimal places.) Profitability Index Rank Project Project Project