Please help me on this homework Problem 26-5A (Part Level Submission) Henkel Com
ID: 2482720 • Letter: P
Question
Please help me on this homework
Problem 26-5A (Part Level Submission) 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 $149,800 Project Lima $165,400 Project Oscar $200,500 Capital investment Annual net income 13,812 13,812 13,812 13,812 13,812 $69,060 18,040 17,350 16,230 11,990 8,922 $72,532 27,029 22,960 20,920 13,122 12,080 $96,111 Year 1 2 4 Total Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)Explanation / Answer
Project kilo
Depreciation =$149800/5
=$29,960
Net cash flow=$29,960+$13,812
=$43,772
Year
cash flow
Net annual cash flow
PV factor
PV
0
-149800
-149800
1
13812
43772
0.86957
38062.82
2
13812
43772
0.75614
33097.76
3
13812
43772
0.65752
28,780.97
4
13812
43772
0.57175
25026.64
5
13812
43772
0.49718
21,762.56
NPV=$146730.75-$149,800
=$3069.25
Project Lima
Depreciation =$165400/5
=$33080
Year
cash flow
Net annual cash flow
PV factor
PV
0
-165400
-165400
1
18040
51120
0.86957
44452.42
2
17350
50430
0.75614
38132.14
3
16230
49310
0.65752
32,422.31
4
11990
45070
0.57175
25,768.77
5
8922
42002
0.49718
20,882.55
NPV=$ 161658.19 -$-165400
=-3741.81
Project oscar
Depreciation =$200500/5
=$40100
Year
cash flow
Net annual cash flow
PV factor
PV
0
-200500
-200500
1
27029
67129
0.86957
58373.36
2
22960
63060
0.75614
47682.19
3
20920
61020
0.65752
40,121.87
4
13122
53222
0.57175
30,429.68
5
12080
52180
0.49718
25,942.85
NPV=$ 202549.95-$-200500
=2049.95
Year
cash flow
Net annual cash flow
PV factor
PV
0
-149800
-149800
1
13812
43772
0.86957
38062.82
2
13812
43772
0.75614
33097.76
3
13812
43772
0.65752
28,780.97
4
13812
43772
0.57175
25026.64
5
13812
43772
0.49718
21,762.56