Question
Q36. Oriole Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment $400000 $600000 Annual
Q36. Oriole Company is considering two capital investment proposals. Estimates regarding each project are provided below:
| Project Soup | Project Nuts | |||
| Initial investment | $400000 | $600000 | ||
| Annual net income | 48000 | 64000 | ||
| Net annual cash inflow | 124000 | 155000 | ||
| Estimated useful life | 5 years | 6 years | ||
| Salvage value | 0 | 0 |
The company requires a 10% rate of return on all new investments.
| Present Value of an Annuity of 1 | ||||
| Periods | 9% | 10% | 11% | 12% |
| 5 | 3.890 | 3.791 | 3.696 | 3.605 |
| 6 | 4.486 | 4.355 | 4.231 | 4.111 |
The annual rate of return for Project Soup is
24.0%.
12.0%.
62.0%.
31.0%.
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Financial Accounting an introduction to concepts, methods and uses
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
13th Edition
978-0538776080, 324651147, 538776080, 9780324651140, 978-0324789003
