Question
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 $164,800 $180,250 $204,000 Annual net income: Year 1 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 companys cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
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.)
Project Bono | Project Edge | Project Clayton | |||||
---|---|---|---|---|---|---|---|
Net present value | $enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places |
eTextbook and Media
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.)
Project Bono | Project Edge | Project Clayton | |||||
---|---|---|---|---|---|---|---|
Annual rate of return | enter a percentage number rounded to 2 decimal places % | enter a percentage number rounded to 2 decimal places % | enter a percentage number rounded to 2 decimal places % |
eTextbook and Media
Rank the projects on each of the foregoing bases. Which project do you recommend?
Project | Cash Payback | Net Present Value | Annual Rate of Return | ||||
---|---|---|---|---|---|---|---|
Bono | select a rank of the project 132 | select a rank of the project 231 | select a rank of the project 321 | ||||
Edge | select a rank of the project 132 | select a rank of the project 123 | select a rank of the project 123 | ||||
Clayton | select a rank of the project 132 | select a rank of the project 123 | select a rank of the project 123 |
The best project is select the best project BonoClaytonEdge. |
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