Problem 26-1A (Part Level Submission) UJ Company i6 ooreidering three ong-term c

Question

Problem 26-1A (Part Level Submission) UJ Company i6 ooreidering three ong-term capital inve5tment proposal-tach investment has useful life of 5 years. Relevant dat5 on each project re follows. Project Bono $101,Gco Project Edge $170,730 Project Clayton 204,000 Capital investment 27,270 23,230 21,210 13,130 er 1 17,170 15,100 12,120 :4,140 Total 95,900 Depreciation s computed by the straight, ine method wth no salvage value. The company's cost of capital is iS%. (Assume that cash flows oocur evenly throughout the year.) (a) Compute the cash payback peried for esch project, (Hound ansurers to 2 decimal places, e.g. 10.50) Project Bono VIDEO: APPLIED SKELLS Attempts: of3 used (b) ower is pertialy correct. Try sgein. th factor tahle prnvarted.) Project Dono Project Edge Project Clayton Net present value Attempts1 of 3 used SAVE FOR LATER

Explanation / Answer

Project Bono

CF0 = -161,600

CF1 = 14,140

CF2 = 14,140

CF3 = 14,140

CF4 = 14,140

CF5 = 14,140

Discount Rate = 15%

NPV = -161,600 + 14,140/ (1.15) + 14,140/ (1.15)2 + 14,140/ (1.15)3 + 14,140/ (1.15)4 +  14,140/ (1.15)5

NPV = -114,200.53

Project Edge

CF0 = -176,750

CF1 = 18,180

CF2 = 17,170

CF3 = 16,160

CF4 = 12,120

CF5 = 9,090

Discount Rate = 15%

NPV = -176,750 + 18,180/ (1.15) + 17,170/ (1.15)2 + 16,160/ (1.15)3 + 12,120/ (1.15)4 +  9,090/ (1.15)5

NPV = -125,883.87

Project Clayton

CF0 = -204,000

CF1 = 27,270

CF2 = 23,230

CF3 = 21,210

CF4 = 13,130

CF5 = 12,120

Discount Rate = 15%

NPV = -204,000 + 27,270/ (1.15) + 23,230/ (1.15)2 + 21,210/ (1.15)3 + 13,130/ (1.15)4 +  12,120/ (1.15)5

NPV = -135,242.92

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