Exercise 12-2 (Video)

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Dougs Custom Construction Company is considering three new projects, each requiring an equipment investment of $23,760. Each project will last for 3 years and produce the following net annual cash flows.

Year		AA		BB		CC
1		$7,560		$10,800		$14,040
2		9,720		10,800		12,960
3		12,960		10,800		11,880
Total		$30,240		$32,400		$38,880

The equipments salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Dougs required rate of return is 12%. Click here to view PV table. (a) Compute each projects payback period. (Round answers to 2 decimal places, e.g. 15.25.)

AA			years
BB			years
CC			years

(b) Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answers to the nearest whole dollar, e.g. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

AA
BB
CC

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