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		$161,600		$176,750		$204,000
Annual net income:
Year 1		14,140		18,180		27,270
2		14,140		17,170		23,230
3		14,140		16,160		21,210
4		14,140		12,120		13,130
5		14,140		9,090		12,120
Total		$70,700		$72,720		$96,960

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.

Compute the net present value for each project. Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) Rank the projects on each of the foregoing bases. Which project do you recommend?