The Three Stooges partnership is considering three long-termcapital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.
|
|
ProjectMoe |
ProjectLarry |
ProjectCurly |
| Capital investment |
$150,000 |
$160,000 |
$200,000 |
| Annual net income: |
|
|
|
| Year |
1 |
13,000 |
18,000 |
27,000 |
| 2 |
13,000 |
17,000 |
22,000 |
|
3 |
13,000 |
16,000 |
21,000 |
|
4 |
13,000 |
12,000 |
13,000 |
|
5 |
13,000
|
9,000
|
12,000
|
| Total |
$65,000
|
$72,000
|
$95,000
|
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.)
Compute the cash payback period for each project. (Round answers to 2 decimalplaces, e.g. 10.50.)
Compute the net present value for each project.
Compute the annual rate of return for each project.