8 Capital rationing Management of Frisco Films is considering the following capital projects: Project Cost Annual After-Tax Cash Flows Number of Years New film studios $20,000,000 $3,100,000 $ 15 Cameras and equipment 3,200,000 800,000 Land improvement 5,000,000 1,180,000 10 Motion picture #1 17,800,000 4,970,000 5 Motion picture #2 11,400,000 3,920,000 Motion picture #3 8,000,000 2,300,000 7 Corporate aircraft 2,400,000 770,000 5 Assume that all projects have no salvage value and that the firm uses a discount rate of 10 percent. Management has decided that only $25,000,000 can be spent in the current year for capital projects. 4 a. Use Excel to determine the net present value, profitability index, and internal rate of return for each of the seven project. Note: Round NPV (final answer) to the nearest whole dollar. Note: Round Pl to two decimal places (i.e. round 1.466 to 1.47). Note: Round IRR percentage to one decimal place (i.e. round 8.555% to 8.6%). Project Name NPV PI IRR Film studios $ 3,578,910 x 1.18 13% Cameras & equipment 1,067,920 x 1.33 18.6 % Land improvement 2,250,628 x 1.45 19.7% Motion picture #1 1,040,276 x 1,06 12.3% Motion picture #2 1,026,008 x 1.09 14.1% Motion picture #3 3,197,320 X 1.4 19.8 % X Corporate aircraft 518,916 X 1.22 16.3% X