Henkel Company is considering three long-term capital investment proposals. Each investment has a us
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 $161,200 $171,600 $214,500 Annual net income: Year 1 13,520 18,200 28,600 2 13,520 17,160 23,400 3 13,520 16,120 22,360 4 13,520 11,960 14,040 5 13,520 8,840 13,000 Total $67,600 $72,280 $101,400
Depreciation is computed by the straight-line method with no salvage value. The companyA????1s cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) (Refer the below table) Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Project Kilo years Project Lima years Project Oscar years LINK TO TEXT
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LINK TO TEXTCompute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round Discount Factor to 5 decimal places.)
Project Kilo Project Lima Project Oscar Net present value $ $ $ LINK TO TEXT
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LINK TO TEXTCompute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50.)
Project Kilo Project Lima Project Oscar Annual rate of return % % % LINK TO TEXT
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LINK TO TEXTRank the projects on each of the foregoing bases. Which project do you recommend?
Project Cash Payback Net
Present Value Annual
Rate of Return Kilo 132 321 231 Lima 132 132 132 Oscar 132 132 132 The best project is KiloLimaOscar