Solution: 1) cash payback period: Project Fix : 3.56 years, Do we Reject or Accept? Project Mark: years, Do we Reject or Accept? According to cash payback technique, Which Project is better? Accept 2) Net Present Value: Project Fix : $ Do we Reject or Accept? Project Mark : $ , Do we Reject or Accept? According to Net Present Value technique, Which Project is better? 3) Annual Rate of Return Project Fix : % , Do we Reject or Accept? Project Mark: % , Do we Reject or Accept? According to the Annual Rate of Return, Which Project is better? 3.62 Project Mark 1,691 156,000 -3,997 144,191 21.05 3. 20 12.375 8,997 Accept Reject Project Fix 9 The Stenny and Homer partnership is considering 2 long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Fix Project Mark Capital investment 142500 Capital investment $160,000 Page 1 Nel mual Cash Years Flows $40,000 $40,000 $40,000 $40,000 5 $40,000 Total $200,000 Annual Net Income $15,000 $15,000 $15,000 $15,000 $15,000 $75,000 Net Annual Cash Years Flows $45,500 $45,000 $44,000 4 $41,000 $39,000 Total $214,500 Annual Net Income $12,500 $12,000 $11,000 $8,000 $6,000 $49,500 - Depreciation is computed by the straight-line method with no salvage value. The company cost of capital is 12%. Discount Factor for Present Value of Annuity of 1 payment is 3.60478. - Discount Factor for Present Value as of 1 payment as follow: Year Discount Factors at 12% 0.89286 0.79719 0.71178 0.63552 0.56743 Instructions: 1. Compute the cash payback period for each project. 2. Compute the net present value for each project. 3. Compute the annual rate of return for each project. 4. Determine which project is better. AWN +