Problem 24-1A (Part Level Submission) U3 Company is considering three long-term

Question

Problem 24-1A (Part Level Submission) 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 $204,000 Capital investment Annual net income Year 1 $163,200 $178,500 14,280 14,280 14,280 14,280 14,280 $71,400 18,360 17,340 16,320 12,240 9,180 $73,440 27,540 23,460 21,420 13,260 12,240 $97,920 3 4 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. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.5o.) Project Bono Project Edge Project Clayton years years years Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: APPLIED SKILLS VIDE O: SIMILAR PROBLEM Attempts: 0 of s used SAVE FOR L

Explanation / Answer

1. Project Bono

Cash Payback period = Total Initial capital investment/expected annual cash inflows

163200/(14280*12) = 163200/171360 = .95 years Ans

2. Project edge = 178500/[(18360+17340+16320+12240+9180)/5]*12= 178500/176256 = 1.01 years Ans

3. project clayton = 204000/[(27540+23460+21420+13260+12240)/5]*12 = 204000/235008 = .89 years ans.

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