Sheffield's Custom Construction Company is considering three new projects, each requiring an equipment investment of $25,520. Each project will last for 3 years and produce the following net annual cash flows.

YearAABBCC1$8,120$11,600$15,0802Unresolved11,60013,920313,92011,60012,760Total$32,480$34,800$41,760

The equipment's salvage value is zero, andSheffielduses straight-line depreciation.Sheffieldwill not accept any project with a cash payback period over 2 years.Sheffield's required rate of return is 12%.

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(a)

Compute each project's payback period.(Round answers to 2 decimal places, e.g. 15.25.)

AAyearsBByearsCCyears

Which is the most desirable project?

The most desirable project based on payback period is

Project AA

Project BB

Project CC

Which is the least desirable project?

The least desirable project based on payback period is

Project BB

Project AA

Project CC

(b)

Compute the net present value of each project.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answers to the nearest whole dollar, e.g. 5,275.For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

AABBCC

Which is the most desirable project based on net present value?

The most desirable project based on net present value is

Project AA

Project CC

Project BB

.

Which is the least desirable project based on net present value?

The least desirable project based on net present value is

Project AA

Project BB

Project CC