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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
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 | $168,000 | $183,750 | $202,000 | ||||
Annual net income: | |||||||
Year 1 | 14,700 | 18,900 | 28,350 | ||||
2 | 14,700 | 17,850 | 24,150 | ||||
3 | 14,700 | 16,800 | 22,050 | ||||
4 | 14,700 | 12,600 | 13,650 | ||||
5 | 14,700 | 9,450 | 12,600 | ||||
Total | $73,500 | $75,600 | $100,800 |
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.) Click here to view PV table.
(a)
Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Project Bono | years | ||
Project Edge | years | ||
Project Clayton | years |
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