Problem 24-1A

U3 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.

		Project Bono		Project Edge		Project Clayton
Capital investment		$160,000		$175,000		$200,000
Annual net income:
Year 1		14,000		18,000		27,000
2		14,000		17,000		23,000
3		14,000		16,000		21,000
4		14,000		12,000		13,000
5		14,000		9,000		12,000
Total		$70,000		$72,000		$96,000

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.)

Your answer is correct. Compute the cash payback period for each project. (Round answers to 2 decimal pl Project Bono Project Edge Project Clayton 48 years 40l years 17 years Your answer is correct. Compute the net present value for each project. (Round answers to 0 decimal place present value is negative, use either a negative sign preceding the number eg For calculation purposes, use 5 decimal places as displayed in the factor table Project Bono Project Edge Project Clayton Net present value 5801 731 Your answer is correct. Compute the annual rate of return for each project. (Hint: Use average annual net inco (Round answers to 2 decimal places, e.g. 10.50.) Project Bono Project Edge Project Clayton Annual rate of return ug% 46 % 3% x Your answer is incorrect. Try again Rank the projects on each of the foregoing bases. Which project do you recommend? Net Present Value Annual Rate of Return Project Cash Payback Bono Edge Clayton The best project is