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Timmons Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.

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Timmons Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.
Project
Brown   Red     Yellow  
   Capital investment
$190,000
$220,000
$250,000
Annual net income:
Year 1 25,000 20,000 26,000
2 16,000 20,000 24,000
3 13,000 20,000 23,000
4 10,000 20,000 17,000
5
8,000
20,000
20,000
Total
$72,000
$100,000
$110,000
Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company's minimum rate of return is the company's cost of capital which is 12%.
Instructions
Compute the following and rank the projects for each category:
Compute the average annual rate of return for each project. (Round your answers to 1 decimal place.)
Brown    %    rank
Red    %    rank
Yellow    %    rank
Compute the cash payback period for each project. (Round your answers to 2 decimal places.)
Brown    years    rank
Red    years    rank
Yellow    years    rank
Compute the net present value for each project. (Round your answers to 0 decimal places.)
Brown    $    rank
Red    $    rank
Yellow    $    rank
Which project do you recommend?

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