Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following net annual cash flows.
| Year |
|
AA |
|
BB |
|
CC |
|
| 1 |
|
$7,000 |
|
$10,000 |
|
$13,000 |
|
| 2 |
|
9,000 |
|
10,000 |
|
12,000 |
|
| 3 |
|
12,000 |
|
10,000 |
|
11,000 |
|
| Total |
|
$28,000 |
|
$30,000 |
|
$36,000 |
|
The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. (Refer the below table)
Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to the nearest whole dollar, e.g. 5,275.)
Which is the most desirable project based on net present value?
The most desirable project based on net present value is  ? |
|
Which is the least desirable project based on net present value?
The least desirable project based on net present value is ?