Verdugo Corporation is considering three long-term capital investment - 10511

Solution Posted by
yousafbhutta

yousafbhutta

Rating : (28)C
Solution Detail
Price: $1.50
  • From: Business,
  • Posted on: Mon 28 May, 2012
  • Request id: None
  • Purchased: 1 time(s)
  • Average Rating: No rating
Request Description

 

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

 

     

 Project 

     

 Brown  

 Red    

 Yellow  

   

 Capital investment

 $191,500

 $221,110

 $251,470

 

Annual net income:

     
 

Year

1

25,125

20,129

26,480

   

2

16,204

20,129

24,208

   

 3

13,327

20,129

23,409

   

 4 

10,262

20,129

17,211

   

 5

8,105

20,129

20,125

   

 Total

 $73,023

$100,645

 $111,433

 

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%. Compute the following and rank the projects for each category:

 

Instructions

 

Compute the average annual rate of return for each project. (Round answers to 1 decimal place, e.g. 10.5.)
Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125.)
Which project do you recommend?

 

Solution Description

 

Please give me your A+++ rating in it and you will get t

Attachments
AP26 Solution.docx
AP26 Solution.d...