Preston Plastics approved several capital projects in a previous budgeting cycle. Three years later, the company conducted a capital budgeting audit to determine how well managers were estimating cash flow amounts and timing. You have been asked to compare the updated information and assess managers’ abilities to estimate cash flows.

You have received an Excel workbook that includes the original project estimates, the original evaluation metrics (NPV, IRR, Payback, and Profitability Index), and updated cash flow information on each project.

Required

a. Recalculate the net present value, internal rate of return, and payback period for each capital project using the updated cash flow information.

b. Prepare a scattergraph visualization that compares the original internal rate of return of each project to the project’s revised internal rate of return. What do you learn from the visualization?

c. Calculate how many projects have seen an increase in internal rate of return. Calculate how many projects have seen a decrease in internal rate of return. Calculate how many projects now have an internal rate of return below the company’s minimum 12% return.

d. Calculate how many projects now have a payback period that is longer than the company’s 5-year maximum.