b	A	B	C
Initial Investment	$3,100,000	$2,450,000	$2,055,000
Useful life of equipment	7 years	7 years	7 years
Estimated salvage value	$0	$400,000	$100,000
Payback period	4.2 years	4.4 years	4 years
Net present value discount at 15%	($30,000)	$21,600	$15,800

The Management of Ortega Manufactring has three different proposals under consideration. The Accounting Department has prepared the above information:

1-Which of the above proposals generates the greatest annual cash flow? a) proposal A b) proposal B c) proposal C d) cannot be determined with the given information

2-The above data indicate that:

a) After considering the timing of future cash flows, each of the three proposals is expected to provide a rate of return in excess of 15%

b) Proposal A will generate net losses annually

c) If the salvage value of proposal A were $52,000 instead of zero, proposal A would have the highest net present value

d) The present value of proposal B's future cash flows is $2,471,600

3-On the basis of the above data, which of the following is FALSE?

a) Proposal A should be considered unacceptable

b) Proposal C is the best alternative because it has the shortest payback period, which is the most meaningful of the capital budgting statistics

c) Proposal A's negative net present value indicates that this alternative will not generate management's required rate of return

d) Although proposals B and C are each acceptable, proposal B is a better investment considering the time value of money