# Question: Sanchez Corporation is considering three long term capital inves

Sanchez Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.

Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company’s minimum rate of return is the company’s cost of capital which is 12%.

Instructions

(a) Compute the annual rate of return for each project. (Round to one decimal.)

(b) Compute the cash payback period for each project. (Round to two decimals.)

(c) Compute the net present value for each project. (Round to nearest dollar.)

(d) Rank the projects on each of the foregoing bases. Which project do yourecommend?

Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company’s minimum rate of return is the company’s cost of capital which is 12%.

Instructions

(a) Compute the annual rate of return for each project. (Round to one decimal.)

(b) Compute the cash payback period for each project. (Round to two decimals.)

(c) Compute the net present value for each project. (Round to nearest dollar.)

(d) Rank the projects on each of the foregoing bases. Which project do yourecommend?

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