Ranking Investment Proposals: Payback Period, Accounting Rate of Return, and Net Present Value Presented is information pertaining to the cash flows of three mutually exclusive investment proposals:

	Proposal X	Proposal Y	Proposal Z
Initial investment	$52,000	$52,000	$52,000
Cash flow from operations
Year 1	50,000	26,000	52,000
Year 2	2,000	26,000
Year 3	27,000	27,000
Disinvestment	0	0	0
Life (years)	3 years	3 years	1 year

(a) Select the best investment proposal using the payback period, the accounting rate of return on initial investment, and the net present value criteria. Assume that the organization's cost of capital is 10 percent.

• Round accounting rate of return four decimal places.

• Round net present value to the nearest whole number.

• Use negative signs with your answers, when appropriate.

	Proposal X	Proposal Y	Proposal Z	Best proposal
Payback period (years)	Answer Correct Mark 1.00 out of 1.00	Answer Correct Mark 1.00 out of 1.00	Answer Correct Mark 1.00 out of 1.00	AnswerXYZX,YX,ZY,Z Correct Mark 1.00 out of 1.00
Accounting rate of return	Answer Incorrect Mark 0.00 out of 1.00	Answer Incorrect Mark 0.00 out of 1.00	Answer Incorrect Mark 0.00 out of 1.00	AnswerXYZX,YX,ZY,Z Correct Mark 1.00 out of 1.00
Net present value	Answer Correct Mark 1.00 out of 1.00	Answer Correct Mark 1.00 out of 1.00	Answer Correct Mark 1.00 out of 1.00	AnswerXYZX,YX,ZY,Z Correct Mark 1.00 out of 1.00