Problem 24-1A (Part Level Submission)

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.

Project Bono Project Edge Project Clayton Capital investment $164,800 $180,250 $208,000 Annual net income: Year 1 14,420 18,540 27,810 2 14,420 17,510 23,690 3 14,420 16,480 21,630 4 14,420 12,360 13,390 5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880

Depreciation is computed by the straight-line method with no salvage value. The companys cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table.

[Collapse question part]

(a)

[Correct answer.] Your answer is correct.

Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)

Project Bono [Entry field with correct answer] years Project Edge [Entry field with correct answer] years Project Clayton [Entry field with correct answer] years

Click if you would like to Show Work for this question: Open Show Work

Show Solution Show Answer Link to Text Link to Text Link to Text

Attempts: 1 of 3 used

[Collapse question part]

(b)

Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Project Bono Project Edge Project Clayton Net present value $ $ $