Corporation is considering three long-term capital investment proposals. Relevan
ID: 2359974 • Letter: C
Question
Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.Project
Brown
Red
Yellow Capital investment
$189,250
$219,220
$249,530 Annual net income:
Year 1
25,105
20,185
26,146 2
16,033
20,185
24,084 3
13,426
20,185
23,140 4
10,235
20,185
17,328 5
8,076
20,185
20,318 Total
$ 72,875
$100,925
$111,016
Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.
Project
Brown
Red
Yellow Capital investment
$189,250
$219,220
$249,530 Annual net income:
Year 1
25,105
20,185
26,146 2
16,033
20,185
24,084 3
13,426
20,185
23,140 4
10,235
20,185
17,328 5
8,076
20,185
20,318 Total
$ 72,875
$100,925
$111,016
Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company Project Brown Red Yellow Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.
Project
Brown
Red
Yellow Capital investment
$189,250
$219,220
$249,530 Annual net income:
Year 1
25,105
20,185
26,146 2
16,033
20,185
24,084 3
13,426
20,185
23,140 4
10,235
20,185
17,328 5
8,076
20,185
20,318 Total
$ 72,875
$100,925
$111,016
Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company
Explanation / Answer
Brown = (72,875 / 5) /(189,250/2) = 15.40% Red = (100,925/5)/(219,200/2) = 18.42% Yellow =(111,016/5)/(249,530/2) =17.80%