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(Solved by Expert Tutors) Dog River Company is considering two capital investment proposals. Relev


follows:

????????????????????????????????????????????????????????????? Project Red??????????? Project Blue

????? Capital investment??????????????????????????? $210,000?????????????? $980,000

????? Annual net income?????????????????????????????? 15,000?????????????????? 90,000

????? Estimated useful life??????????????????????????? 7 years????????????????? 7 years

Depreciation is calculated by the straight-line method with no salvage value.? Dog River requires a10% rate of return on all new investments.? The present value of 1 for 7 periods at 10% is .513 and the present value of an annuity of 1 for 7 periods is 4.868.

Instructions

(a)? Calculate the cash payback period for each project.????? 4 Marks

(b)? Calculate the net present value for each project.??????????? 4 Marks

(c)? Calculate the annual rate of return for each project.?????? 4 Marks

(d)? Which project should Dog River select?????????????????????????? 2 Marks

 


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DATE ANSWERED

Apr 19, 2020

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