Question

Monitor Consulting Inc. is in need of a Date Analytic Terminal for its financial analysts. The company has received three proposals, with related facts as follows: Proposal AProposal BProposal C Initial investment in equipment$90,000$90,000$90,000 Annual cash inflow increases in operations: Year 180,00045,00090,000 Year 210,00045,0000 Year 345,00045,0000 Salvage value000 Estimated life3 yrs.3 yrs.1 yr. I The company uses straight-line depreciation for all capital assets. Ignore income taxes. Required: a.Compute the payback period, net present value, and accrual accounting rate of return using average annual income, for each proposal. Use a discount rate of 14 percent. b.Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best? Why?

          Monitor Consulting Inc. is in need of a Date Analytic Terminal for its financial analysts. The company has
received three proposals, with related facts as follows:
Proposal AProposal BProposal C
Initial investment in equipment$90,000$90,000$90,000
Annual cash inflow increases in operations:
Year 180,00045,00090,000
Year 210,00045,0000
Year 345,00045,0000
Salvage value000
Estimated life3 yrs.3 yrs.1 yr.
I
The company uses straight-line depreciation for all capital assets. Ignore income taxes.
Required:
a.Compute the payback period, net present value, and accrual accounting rate of return using average
annual income, for each proposal. Use a discount rate of 14 percent.
b.Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best? Why?

Monitor Consulting Inc. is in need of a Date Analytic Terminal for its financial analysts. The company has
received three proposals, with related facts as follows:
Proposal AProposal BProposal C
Initial investment in equipment90,00090,00090,000
Annual cash inflow increases in operations:
Year 180,00045,00090,000
Year 210,00045,0000
Year 345,00045,0000
Salvage value000
Estimated life3 yrs.3 yrs.1 yr.
I
The company uses straight-line depreciation for all capital assets. Ignore income taxes.
Required:
a.Compute the payback period, net present value, and accrual accounting rate of return using average
annual income, for each proposal. Use a discount rate of 14 percent.
b.Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best? Why?

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