Lapides Ltd. is a small company that is currently analyzing capital expenditure proposals for the purchase of

Question:

Lapides Ltd. is a small company that is currently analyzing capital expenditure proposals for the purchase of equipment. The capital budget is limited to $250,000, which Lapides believes is the maximum capital it can raise.

The financial adviser is preparing an analysis of four projects that the company is considering, as follows:

Instructions
(a) Calculate the cash payback period for each of the four projects.
(b) Calculate the net present value for each project at a cost of capital of 12%.
(c) Which projects, if any, would you recommend funding, and why?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...