The Three Stages partnership is considering three long-term capital investment proposals. Each investment has a useful life

Question:

The Three Stages partnership is considering three long-term capital investment proposals. Each investment has a useful life of five years. Relevant data on each project are as follows:

Depreciation is calculated by the straight-line method and there is no salvage value. The company's cost of capital is 15%. (Use average net annual cash flows in your calculations.)
Instructions
(a) Calculate the cash payback period for each project.
(b) Calculate the net present value for each project.
(c) Calculate the annual rate of return for each project.
(d) Rank the projects based on each of your answers for parts (a), (b), and (c). Which project do you recommend?

Net Present Value
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Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Partnership
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Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...