The equipments salvage value is zero and doug uses

Reference no: EM13482399

Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $23,320. Each project will last for 3 years and produce the following net annual cash flows.

Year	AA	BB	CC
1	$7,420	$10,600	$13,780
2	9,540	10,600	12,720
3	12,720	10,600	11,660
Total	$29,680	$31,800	$38,160

The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%.

Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.)

AA			years
BB			years
CC			years

Which is the most desirable project?

The most desirable project based on payback period is

Which is the least desirable project?

The least desirable project based on payback period is

(b)

Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to the nearest whole dollar, e.g. 5,275.)

AA
BB
CC

Which is the most desirable project based on net present value?

The most desirable project based on net present value is

Which is the least desirable project based on net present value?

The least desirable project based on net present value

Reference no: EM13482399

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