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Compute the net present value for each project

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Reference no: EM131997169

Question - NPV with Unequal Cash Flows

Sanchez Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.

Project

Brown

Red

Yellow

Capital investment:

190,000

220,000

250,000

Annual net income:


Year 1

25,000

20,000

26,000

Year 2

16,000

20,000

24,000

Year 3

13,000

20,000

23,000

Year 4

10,000

20,000

17,000

Year 5

8,000

20,000

20,000

Total

72,000

100,000

110,000

Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company's minimum rate of return is the company's cost of capital which is 12%.

Instructions: Compute the net present value for each project. (Round to the nearest dollar.)

Reference no: EM131997169

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