Henkel Company is considering three long-term capital investment proposals. Each
ID: 2380820 • Letter: H
Question
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
$165,850
$176,550
$202,800 Annual net income:
Year 1
13,910 18,725
29,425
2
13,910 17,655
24,075
3
13,910 16,585
23,005
4
13,910 12,305
14,445
5
13,910 9,095
13,375
Total
$69,550 $74,365
$104,325
Depreciation is computed by the straight-line method with no salvage value. The company 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
$165,850
$176,550
$202,800 Annual net income:
Year 1
13,910 18,725
29,425
2
13,910 17,655
24,075
3
13,910 16,585
23,005
4
13,910 12,305
14,445
5
13,910 9,095
13,375
Total
$69,550 $74,365
$104,325
Depreciation is computed by the straight-line method with no salvage value. The company 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
$165,850
$176,550
$202,800 Annual net income:
Year 1
13,910 18,725
29,425
2
13,910 17,655
24,075
3
13,910 16,585
23,005
4
13,910 12,305
14,445
5
13,910 9,095
13,375
Total
$69,550 $74,365
$104,325
Depreciation is computed by the straight-line method with no salvage value. The company 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
$165,850
$176,550
$202,800 Annual net income:
Year 1
13,910 18,725
29,425
2
13,910 17,655
24,075
3
13,910 16,585
23,005
4
13,910 12,305
14,445
5
13,910 9,095
13,375
Total
$69,550 $74,365
$104,325
Depreciation is computed by the straight-line method with no salvage value. The company
Explanation / Answer
Project Kilo
Project Lima
Project Oscar
Capital investment
$165,850
$176,550
$202,800
Annual net income:
Year
1
13,910
18,725
29,425
2
13,910
17,655
24,075
3
13,910
16,585
23,005
4
13,910
12,305
14,445
5
13,910
9,095
13,375
Total
$69,550
$74,365
$104,325
AVERAGE ANNUAL NET INCOME
69550/5
=13910
74365/5
=14873
104325/5
=20865
ANNUAL RATE OF RETURN=
(13910/165850)*100
=8.39%
(14873/176550)*100
=8.42%
(20865/202800)*100
=10.28%
Project Kilo
Project Lima
Project Oscar
Capital investment
$165,850
$176,550
$202,800
Annual net income:
Year
1
13,910
18,725
29,425
2
13,910
17,655
24,075
3
13,910
16,585
23,005
4
13,910
12,305
14,445
5
13,910
9,095
13,375
Total
$69,550
$74,365
$104,325
AVERAGE ANNUAL NET INCOME
69550/5
=13910
74365/5
=14873
104325/5
=20865
ANNUAL RATE OF RETURN=
(13910/165850)*100
=8.39%
(14873/176550)*100
=8.42%
(20865/202800)*100
=10.28%
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