BUS 278 WEEK 4 MID TERM EXAM QUESTION 11 100% CORRECT
TCO 6 Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below.
Project Soup Project Nuts
Initial Investment $600,000 $900,000
Annual Net Income $30,000 $63,000
Annual Cash Inflow $150,000 $213,000
Salvage Value $0 $0
Estimated Useful Life 5 years 6 years
The company requires a 10% rate of return on all new investments.
Part (a): Calculate the payback period for each project.
Part (b): Calculate the net present value for each project.
Part (c): Which project should Carr Company accept and why?