Question

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 $202.000 Annual net income: Year 1 14.420 18,540 27,810 14,420 17,510 23,690 14,420 16,480 21,630 14,420 + 13,390 12,360 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 company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono years Project Edge years Project Clayton years

Answer 1

cOMputationof cash payback period payback periad दै २ + ) T cash nProws ave euenly taI 90vestent Annual net cash Rhloco far pject Bono Yeavs 4 3 2 Net ncome depreciation329b0 32960 32960 32960 Annual het cash ntoco l4420 1442042d 1eLp20 I442 0 32960 $47380 47380 473 4-7 38o $47380 D preciation 164 8o0 $32960 164800 41380 S3.48 Years paybact period

year s 9270 2 12366 16LfB0 36050 12603 36Os L8450 7510 36050 Net ancoe ) Deprectation 36050 Annuual het Cash anflocos 45320 S4500 53560 525304-8410 payback peciod p cash etouos aegcan even COn necavered Cost Cash eroud ding the year eost recoveved- Pulf years 3.441 ears 196 60 48410 3 + वकयगिणयढ म्यलिएव years 2 23690 21630 13390 12360 Not Gncone 4pepreciation 21810 4Ol400 4Oueo6 4a040 4040D 68210 64090 620305370 5210 Annual het aash npracos

payback Period 1610 S3199 - 3.14 4ears 3 + project Bono OPO1 F1p01 Project Cdge gears' 348 1S2 gears 3.441082 -ears pregect clatyton COmpcetation a net present Value 91 Przgpects Ramo घि P১০২ct &o0 0 cash netows Precent value a tial uestent 47380 x PVAE@ISfer yeans -T 164 800 168002 91380 x 3.3522 5 5वा3

for praject edge Gclacyton clayton Present edge cash year cash infloul pvfe15 present value nplow value 53315 .8696 41393 68210 756 6575 34538 62030 S4500 53560 52-530 roCLR764090 0785 53790 3075 26232 448410 0518 27681 L45 320 5 O4972 2533 52160 205548 e0200) 7262 nitial nvetoent (80250) $3548 $7608 Alet present Valkee pects Tedge ROno claytan Alet present value $5973 7608 t 35 48

Annual rate of return AVerage nettncoue InPEalL fnuestment xLoo edge clayton Bono 19776 AUevage net ncane 444420144832 $12100 74160 $98880 5 9-79 1 Annualrate of retuw 8 75: .23 ILe832X100 i802 50 19776x100 1444P20XI0 164800 202000 Project cash payback Annual rate NAV 2 Bono edge 2 claytan