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.)
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