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 $164,800 $180,250 $206,000

Annual net income:

Year1 14,420 18,540 27,810

2 14,420 17,510 23,690

3 14,420 16,480 21,630

4 14,420 12,360 13,390

5 14,420 9,270 12,360

Total $72,100 $74,160 $98,880

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

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

b) 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).For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

b) 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.)

c)

Rank the projects on each of the foregoing bases. Which project do you recommend? Net Annual Project Cash Payback Present Value Rate of Return Bono Edge Clayton The best project is 4}