21-22 Payba is capital expenditu imed to $6,000,000 projects under consid Payback and NPV methods, no income taxes. (CMA, adapted) Andrews Construction is analyzing al expenditure proposals for the purchase of equipment in the coming year. The capital budget is to $6,000,000 for the year. Lori Bart, staff analyst at Andrews, is preparing an analysis of the three e under consideration by Corey Andrews, the company's owner. www.pretato longerade I B Project A C Project B D Project C 2 Projected cash outflow 3 Net initial investment $3,000,000 $1,500,000 $4,000,000 5 Projected cash inflows 6 Year 1 7 Year 2 8 Year 3 9 Year 4 $1,000,000 1,000,000 1,000,000 1,000,000 $ 400,000 900,000 800,000 $2,000,000 2,000,000 200,000 100,000 Recured Tyou want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/cost12e and download the template for Exercise 21-22. 1. Because the company's cash is limited, Andrews thinks the payback method should be used to choose between the capital budgeting projects. a. What are the benefits and limitations of using the payback method to choose between projects? 0. Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method, which projects should Andrews choose? bort thinks that proiects should be selected based on their NPVs. The required rate of return is 10% Assume all cash flows occur at the end of the year except for initial investment amounts. Calculate the NPV for each project. Ignore income taxes. ich projects, if any, would you recommend funding? Briefly explain why