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MBA, Ph.D in Management
Harvard university
Feb-1997 - Aug-2003
Professor
Strayer University
Jan-2007 - Present
I only need help with Clayton's Net present value and Annual rate of return?
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 BonoProject EdgeProject ClaytonCapital investment $164,800$180,250$208,000 Annual net income: Year 114,420 18,54027,810 214,420 17,51023,690 314,420 16,48021,630 414,420 12,36013,390 514,420 9,27012,360 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.
Your answer is correct.Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Project Bono3.48
yearsProject Edge3.40
yearsProject Clayton3.17
years
Your answer is partially correct. Try again.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 BonoProject EdgeProject Clayton
Net present value $-5975 -7531 ??????
Your answer is partially correct. Try again.Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50.)
Project BonoProject EdgeProject Clayton Annual rate of return
17.50 16.46 ?????
Your answer is correct.Rank the projects on each of the foregoing bases. Which project do you recommend?
ProjectCash PaybackNet
Present ValueAnnual
Rate of ReturnBono3
2
2
Edge2
3
3
Clayton1
1
1
The best project is Clayton
.
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