Depreciation is computed by the straight-line method with

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Reference no: EM13583056

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

		Project
		Brown	Red
Capital investment		$249,400	$189,610
Annual net income:
Year	1	26,152	25,425
	2	24,312	16,323
	3	23,239	13,021
	4	17,104	10,067
	5	20,093	8,472
	Total	$ 110,900	$73,308

Depreciation is computed by the straight-line method with no salvage value. The company's minimum rate of return is the company's cost of capital which is 12%. Assume cash flows occur evenly throughout the year

Instructions:

Compute the following and rank the projects for each category:

Compute the average annual rate of return for each project. (Round your answers to 1 decimal place.)
Compute the cash payback period for each project. (Round your answers to 2 decimal places.)
Compute the net present value for each project. (Round your answers to 0 decimal places.)
Rank the projects on each of the foregoing bases. Which project do you recommend and WHY?

Reference no: EM13583056

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