Problem 1 (Textbook Reference: P10-5) Rank proposals using the payback period, unadjusted rate of return, profitability index, and time-adjusted rate of return Merryll, Inc., is considering three different investments involving depreciable assets with no salvage value. The following data relate to these investments:

Required:The income tax rate is 40%. Management requires a minimum return on investment of 12%.

Rank these proposals using the following selection techniques. Round each answer two decimal places. (1) Payback period rankings: _________________________________________________________ a. Payback period calculation Investment 1: ____________________________________ b. Payback period calculation Investment 2: ____________________________________ c. Payback period calculation Investment 3: ____________________________________ (2) Unadjusted rate of return rankings: _________________________________________________ a. Unadjusted rate of return calculation Investment 1: ____________________________ b. Unadjusted rate of return calculation Investment 2: ____________________________ c. Unadjusted rate of return calculation Investment 3: ____________________________ (3) Profitability index: ______________________________________________________________ a. Profitability index calculation Investment 1: __________________________________ b. Profitability index calculation Investment 2: __________________________________ c. Profitability index calculation Investment 3: __________________________________ (4) Time-adjusted rate or return rakings: ________________________________________________ a. Unadjusted rate of return calculation Investment 1: _____________________________ b. Unadjusted rate of return calculation Investment 2: _____________________________ c. Unadjusted rate of return calculation Investment 3: _____________________________ ***Use the Template provided below for Investment 1, 2 and 3 ***

Expected Before- Expected After Tax Cash Inflow Life of Proposal (as) 10 20 10 ash Tax Cash Inflow Investiment Outlay per Year er ear 140,000 $ 240,000 S 360,000 $ 37,333 $ 72,000 S 89,333 $ 28,000 48,000 68,000