Question

Cheyenne Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project SoupProject Nuts Initial investment$400000 $600000 Annual net income46000 62000 Net annual cash inflow122000 153000 Estimated useful life5 years 6 years Salvage value0 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods9% 53.890 3.791 3.696 3.605 64.486 4.355 4.231 4.111 The annual rate of return for Project Soup is

Answer 1

the annual rate of return for project soup is 23%

Step-by-step explanation:

The computation of the annual rate of return for project soup is shown below

Annual Rate of Return is

= Average Net Income ÷ Average Investment × 100

= $46,000 ÷ ($400,000 ÷ 2) × 100

= $46,000 ÷ $200,000 × 100

= 23%

Hence, the annual rate of return for project soup is 23%

The same is relevant and considered