Problem 26-1A (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		$160,000		$175,000		$200,000
Annual net income:
Year 1		14,000		18,000		27,000
2		14,000		17,000		23,000
3		14,000		16,000		21,000
4		14,000		12,000		13,000
5		14,000		9,000		12,000
Total		$70,000		$72,000		$96,000

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.)

Problem 26-1A (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 $160,000 $175,000 $200,000 Capital investment Annual net income: 14,000 27,000 Year 1 18,000 14,000 17,000 23,000 14,000 16,000 21,000 14,000 12,000 13,000 12,000 14,000 9,000 $70,000 $72,000 $96,000 Total 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.) Click here to view PV table. (a) Ex Your answer is incorrect. Try again Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) 2.67 years Project Bono Project Edge 1.64 years Project Clayton 1.47 years