# Question: U3 Company is considering three long term capital investment proposals Each

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.

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.)

Instructions

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

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

(c) Compute the annual rate of return for each project. (Round to two decimals.)

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

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.)

Instructions

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

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

(c) Compute the annual rate of return for each project. (Round to two decimals.)

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

## Answer to relevant Questions

A Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 4 years. Option B ...Messi Company is considering an investment that will return a lump sum of $900,000 6 years from now. What amount should Messi Company pay for this investment to earn an 8% return?Carly Simon wishes to invest $18,000 on July 1, 2017, and have it accumulate to $50,000 by July 1, 2027. Use a financial calculator to determine at what exact annual rate of interest Carly must invest the $18,000.In the fourth year of an asset’s 5-year useful life, the company decides that the asset will have a 6-year service life. How should the revision of depreciation be recorded? Why?Rihanna Company is considering purchasing new equipment for $450,000. It is expected that the equipment will produce net annual cash flows of $60,000 over its 10-year useful life. Annual depreciation will be $45,000. Compute ...Post your question