Question
In: Accounting
Q35. Cullumber Company is considering two capital investment proposals. Estimates regarding each project are provided below:...
Q35. Cullumber Company is considering two capital investment
proposals. Estimates regarding each project are provided
below:
| Project Soup | Project Nuts | |||
| Initial investment | $300000 | $480000 | ||
| Annual net income | 30000 | 46000 | ||
| Net annual cash inflow | 110000 | 146000 | ||
| Estimated useful life | 5 years | 6 years | ||
| Salvage value | 0 | 0 |
The company requires a 10% rate of return on all new
investments.
| Present Value of an Annuity of 1 | ||||
| Periods | 9% | 10% | 11% | 12% |
| 5 | 3.89 | 3.791 | 3.696 | 3.605 |
| 6 | 4.486 | 4.355 | 4.231 | 4.111 |
The cash payback period for Project Nuts is
6.86 years.
3.29 years.
3.75 years.
10.00 years.
Solutions
Expert Solution
INITIAL INVESTMENT = COST OF PROJECT WHICH RESULT IN OUTFLOW IN THE INITIAL YEAR
NET ANNUAL CASH FLOW = NET INCOME + DEPRECIATION
ekkarill92 answered 2 years agoRelated Solutions
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project...
Carr Company is considering two capital investment proposals.
Estimates regarding each project are provided below:
Project Soup Project
Nuts
Initial
investment
$400,000
$600,000
Annual net income 30,000 46,000
Net annual cash
inflow
110,000
146,000
Estimated useful life 5
years
6 years
Salvage value -0- -0-
The company requires a 10% rate of return on all new
investments.
Present Value of an Annuity of 1
Periods
9% 10% 11% 12%
5
3.890
3.791
3.696 3.605
6
4.486
4.355
4.231 4.111
The...
Concord Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project...
Concord Company is considering two capital investment proposals.
Estimates regarding each project are provided below: Project Soup
Project Nuts Initial investment $390000 $516000 Annual net income
30000 46000 Net annual cash inflow 110000 126000 Estimated useful
life 5 years 6 years Salvage value 0 0 The company requires a 10%
rate of return on all new investments. Present Value of an Annuity
of 1 Periods 9% 10% 11% 12% 5 3.89 3.791 3.696 3.605 6 4.486 4.355
4.231 4.111 The...
Tamarisk Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project...
Tamarisk Company is considering two capital investment
proposals. Estimates regarding each project are provided
below:
Project
Soup
Project
Nuts
Initial investment
$335000
$648000
Annual net income
30000
46000
Net annual cash inflow
110000
146000
Estimated useful life
5 years
6 years
Salvage value
0
0
The company requires a 10% rate of return on all new
investments.
Present Value of an Annuity of 1
Periods
9%
10%
11%
12%
5
3.89
3.791
3.696
3.605
6
4.486
4.355
4.231
4.111
KingbirdCompany is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup...
KingbirdCompany is considering two capital investment proposals.
Estimates regarding each project are provided below:
Project Soup
Project Nuts
Initial investment
$470000
$456000
Annual net income
30000
46000
Net annual cash inflow
110000
146000
Estimated useful life
5 years
6 years
Salvage value
0
0
The company requires a 10% rate of return on all new
investments.
Present Value of an
Annuity of 1
Periods
9%
10%
11%
12%
5
3.89
3.791
3.696
3.605
6
4.486
4.355
4.231
4.111
The cash...
Roshek Company is considering a capital investment proposal. Estimates regarding the project are provided below: I...
Roshek Company is considering a capital investment proposal.
Estimates regarding the project are provided below: I nitial
Investment: $85,000 Annual Net income: $5,750 Estimated Useful
Life: 5 years Salvage Value: $10,000 The Company requires a 9% rate
of return on all new investments. a. The Payback Period (rounded)
for this proposal is? b. The Net Present Value (rounded) for this
proposal is? c. The Annual Rate of Return (rounded) for this
proposal is?
Roshek Company is considering a capital investment proposal. Estimates regarding the project are provided below: I...
Roshek Company is considering a capital investment proposal.
Estimates regarding the project are provided below: I
nitial Investment: $85,000
Annual Net income: $5,750
Estimated Useful Life: 5 years
Salvage Value: $10,000
The Company requires a 9% rate of return on all new
investments.
a. The Payback Period (rounded) for this proposal is?
b. The Net Present Value (rounded) for this proposal is?
c. The Annual Rate of Return (rounded) for this proposal is?
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
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
$ 204,000
Annual net income:
Year 1
14,420
18,540
27,810
2
14,420
17,510
23,690
3
14,420
16,480
21,630
4
14,420
12,360
13,390
5
14,420
9,270
12,360
Total
$ 72,100
$ 74,160
$ 98,880
Depreciation is computed by the straight-line method with no
salvage...
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
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. I got all the answers by my
computation for average rate of return Is wrong
Project
Bono
Project Edge
Project
Clayton
Capital
investment
$164,800
$180,250
$206,000
Annual net
income:
Year 1
14,420
18,540
27,810
2
14,420
17,510
23,690
3
14,420
16,480
21,630
4
14,420
12,360
13,390
5
14,420
9,270
12,360
Total
$72,100
$74,160
$98,880
Depreciation...
Henkel Company is considering three long-term capital investment proposals. Each investment has a useful life of...
Henkel 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 Kilo
Project Lima
Project Oscar
Capital investment
$165,850
$176,550
$200,850
Annual net income:
Year
1
13,910
18,725
29,425
2
13,910
17,655
24,075
3
13,910
16,585
23,005
4
13,910
12,305
14,445
5
13,910
9,095
13,375
Total
$69,550
$74,365
$104,325
Depreciation is computed by the straight-line method with no
salvage value. The company’s cost...
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
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
$161,600
$176,750
$204,000
Annual net income:
Year 1
14,140
18,180
27,270
2
14,140
17,170
23,230
3
14,140
16,160
21,210
4
14,140
12,120
13,130
5
14,140
9,090
12,120
Total
$70,700
$72,720
$96,960
Depreciation is computed by the straight-line method with no
salvage value. The company’s cost of capital...
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