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 profitability index for each project

d. Compute the annual rate of return for each project. (Round to two decimals.) (Hint: Use average annual net income in your computation.)

e. Rank the projects on each of the foregoing bases. Which project do you recommend?

P3. Us Company is considering three long-term capital investment proposals. Each investment has a useful life of years. Relevant data on each project are as follows Project A Project Project Capital Investment Net Income Year 1 Net Income Year 2 575,000 18.000 18,000 18,000 585,000 26.000 23.000 595,000 27,000 23.000 Net Income Year 3 Net Income Year 4 Net Income Year 5 18,000 21.000 19,000 16,000 105,000 21.000 20,000 19.000 110,000 18,000 Total income 90,000 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 129. (Aasume that cash flow occur evenly throughout the year) Instructions Compute the oth payback period for each project. (Round to two decimals) b. Compute the represent value for each project. (Round to nesret dolor.) . Compute the profitability index for each project Compute the annual rate of return for each project. (Round to two decimals.) (Hint: Use average sal net income in your computation) c. Rank the projects on each of the foregoing buses which project do you recommend