Sunland company is considering two capital investment proposals. estimates regarding each project are provided below. project soup project nuts initial investment $600,000 $900,000 annual net income $30,000 $63,000 annual cash inflow $150,000 $213,000 salvage value $0 $0 estimated useful life 5 years 6 years the company requires a 10% rate of return on all new investments. part (a): calculate the payback period for each project. part (b): calculate the net present value for each project. part (c): which project should carr company accept and why?

a. 4 years and 4.22 years

b.  -$31,350 and $27,615

c. Project Nuts

Explanation:

a. The formula to compute the payback period is shown below:

= Initial investment ÷ Net cash flow

For project soup, it would be

= $600,000 ÷ $150,000

= 4 years

For project nuts, it would be

= $900,000 ÷ $213,000

= 4.22 years

b. The computation of the Net present value is shown below

= Present value of all yearly cash inflows after applying discount factor - initial investment

For project soup, it would be

= $568,650 - $600,000

= -$31,350

The present value is computed below:

= Annual cash flow × pvifa for 5 years at 10%

= $150,000 × 3.791

= $568,650

For project nuts, it would be

= $927,615 - $900,000

= $27,615

The present value is computed below:

= Annual cash flow × pvifa for 6 years at 10%

= $213,000 × 4.355

= $927,615

Kindly refer pvifa table

c. The project Nuts should be accepted as it has positive net present value.

answer; (10%) commission;

answer; foreign exchange transaction;