Capital rationing) Management of Wilson Studios is considering the follow¬ ing capital projects:

Assume that all projects have no salvage value and that the firm uses a dis¬ count rate of 10 percent. Management has decided that only $25,000,000 can be spent in the current year for capital projects.

a. Determine the net present value, profitability index, and internal rate of return for each of the seven projects.

b. Rank the seven projects according to each method used in part (a).

c. Indicate how you would suggest to the management of Wilson Studios that the money be spent. What would be the total net present value of your selected investments? LO.1 

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Annual After-Tax Number of Project Cost Cash Flows Years Build new film studios $20,000,000 $3,100,000 15 Cameras and equipment 3,200,000 800,000 8 Land improvement 5,000,000 1,180,000 10 Motion picture #1 17,800,000 4,970,000 Motion picture #2 Motion picture #3 Corporate aircraft 11,400,000 3,920,000 8,000,000 2,300,000 2,400,000 770,000 475