Dog river company is considering two capital investment proposals. Relevant data on each project is:

 

PROJECT RED

capital investment $210 000

annual net income $15 000

estimated useful life 7 years

 

PROJECT BLUE

capital investment $980 000

annual net income $90 000

estimated useful life 7 years

 

Depreciation is calculated using straight line method with no salvage value. Dog river requires a 10% rate of return on all new investments. The present value of 1 to 7 periods at 10% is 0.513 and the pv of an annuity of 1 to 7 periods is 4.868

 

1. calculate cash payback period for each project

2. calculate the net present value for each project

3. calculate the annual rate of return for each project

4. which project should dog river select

Answer rating: 100% (QA)

Lets calculate the requested values for each project 1 Cash Payback Period The cash payback period i... View the full answer