The Carr Company is considering two capital investment proposals. Estimates rega

Question

The Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
.....................................Project Soup......Project Nuts
Initial Investment..................$400,000..........$600,000
Annual net income....................20,000.............42,000
Net annual cash inflow.............100,000...........142,000
Estimated useful life...................5 years...........6 years
Salvage value..............................0....................0....
The company requires a 10% rate of return on all new investments.
.............................Present Value of an Annuity of 1
Periods..................._9%_...._10%_...._11%_...._12%_
...5........................3.890....3.791.....3.696......3.605
...6........................4.486....4.355.....4.231......4.111
The cash payback period for Project Soup is

a 20 years
b 4 years
c 5 years
d 10 years

Explanation / Answer

using the rate of return formula we get option B

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.