The Three Stooges partnership is considering three longterm capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.
Project Moe 
Project Larry 
Project Curly 

Capital investment 
150,000 
160,000 
200,000 
Annual net income: 

Year 1 
13,000 
18,000 
27,000 
Year 2 
13,000 
17,000 
22,000 
Year 3 
13,000 
16,000 
21,000 
Year 4 
13,000 
12,000 
13,000 
Year 5 
13,000 
9,000 
12,000 
Total 
$65,000 
$72,000 
$95,000 
Depreciation is computed by the straightline method with no salvage value. The company’s cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
Instructions
(a) Compute the cash payback period for each project. (Round to two decimals.)
(b) Compute the net present value for each project. (Round to nearest dollar.)
(c) Compute the annual rate of return for each project. (Round to two decimals.) (Hint: Use average annual net income in your computation.)
(d) Rank the projects on each of the foregoing bases. Which project do you recommend?