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.

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.)

a. Compute the cash payback period for each project.

b. Compute the net present value for each project

c. Compute the annual rate of return for each project

d. Rank the projects on each of the foregoing bases: Cash Payback, Net Present Value, and Annual Rate of Return

Project Bono $169,600 Project Edge $185,500 Project Clayton $214,000 Capital investment Annual net income: Year 1 14.840 14,840 14,840 14,840 14.840 $74,200 19.080 18.020 16.960 12,720 9,540 $76,320 28,620 24.380 22,260 13,780 12,720 $101,760 Total