Problem 24-1A

Henkel Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.

capital investment: Project Kilo $168,950 Project Lima $179,850 Project Oscar $196,950

Annual net income: Year 1 14,170 19,075 29,975

2 14,170 17,985 24,525

3 14,170 16,895 23,435

4 14,170 12,535 14,715

5 14,170 9,265 13,625

Total $70,850 $75,755 $106,275

Depreciation is computed by the straight-line method with no salvage value. The companys cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)

Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)

Project Kilo	___________ years
Project Lima	___________years
Project Oscar	___________years

Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).)

Net present value Project Kilo: $________ Project Lima: $__________ Project Oscar: $_________

Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50.)

Annual rate of return Project Kilo: $________ Project Lima: $__________ Project Oscar: $_________

Rank the projects on each of the foregoing bases. Which project do you recommend? *** Answer options for blanks are "1," "2," or "3"****

Project	Cash Payback	Net Present Value	Annual Rate of Return
Kilo	______	_____	_______
Lima	______	_______	_______
Oscar	_______	_______	_______

The best project is _______ (oscar or lima or kilo)