E26-12 Suzaki manufacturing company is considering three new projects,each requi

Question

E26-12

Suzaki manufacturing company is considering three new projects,each requiring an equipment investment of $22,000. Eachproject will last for 3 years and produce the following

Year              AA                             BB                              CC

1                     $7,000                        $9,500                        $13,000

2                       9,000                        9,500                         10,000

3                      15,000                       9,500                            9,000

Total               $31,000                     $28,500                       $32,000

The equipment’s salvage value is zero. Suzuki usesstraight –line depreciation. Suzaki will not accept anyproject with a payback period over 2 years. Suzaki’s minimumrequired rate of return is 12%.

A. Compute each projects payback period, indicating the mostdesirable project and the least desirable project using thismethod. (Round to two decimals)

B. Compute the net present value of each project, Dose yourevaluation change? (Round to nearest dollar.)

Explanation / Answer

E26-12 Suzaki manufacturing company is considering three new projects,each requi

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