Dinkel 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 Granada Project Jackson Project Dorantes
Capital investment $150,000 $160,000 $200,000
Annual net income:
Year 1 13,000 18,000 27,000
2 13,000 17,000 22,000
3 13,000 16,000 21,000
4 13,000 12,000 13,000
5
13,000


9,000


12,000


Total
$65,000


$72,000


$95,000



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.)





Incorrect.

Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.)
Project Granada years
Project Jackson years
Project Dorantes years






Incorrect.

Compute the net present value for each project. (Round computations and final answer for present value to 0 decimal places, e.g. 125. Round computations for Discount Factor to 5 decimal places. If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Project Granada $
Project Jackson $
Project Dorantes $






Incorrect.

Compute the annual rate of return for each project. (Round answers to 2 decimal places, e.g. 10.50. Hint: Use average annual net income in your computation.)
Project Granada %
Project Jackson %
Project Dorantes %






Correct.

Rank the projects on each of the foregoing bases. Which project do you recommend?

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