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Safari File Edit View History Bookmarks Window Help ? edugen.wileyplus.com Basic Financial Calculator Download rb...nts-RARBG Facebook Problem 24-1A 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 $176,000 Project Edge $192,500 Project Clayton $212,000 Capital investment Annual net income: Year 1 15,400 15,400 15,400 15,400 15,400 $77,000 19,800 18,700 17,600 13,200 9,900 $79,200 29,700 25,300 23,100 14,300 13,200 $105,600 Total Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g Project Bono Project Edge Project Clayton years years years 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 45 or parentheses eg (45). For the factor table provided.) eg calculation purposes, use 5 decimal places as displayed in Project Bono Project Edge Project Clayton Net present valueExplanation / Answer
Solution for 24-IA
Project Bono: Initial Investment = $176000 Annual Depreciation = $176000/5 = $35200 Annual Cash Flows = $15,400 + $35200= $50600 Payback Period = $176000/$50600 Payback Period = 3.48 years Net Present Value = -$176000 + $50600*PVIFA(15%, 5) Net Present Value = -$176000 + $50600*3.35216 Net Present Value = -$6381 Annual Rate of Return = Average Annual Income / Average Investment Annual Rate of Return = $15400 / ($176000/2) Annual Rate of Return = 17.50%Related Questions
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