Based on article "Capital Investment Appraisal Techniques: A Survey of Current Usage

https://www.researchgate.net/profile/Alan_Sangster/publication/227638108_Capital_investment_appraisal_techniques_A_survey_of_current_usage/links/59db4ba8a6fdccfc6e23368f/Capital-investment-appraisal-techniques-A-survey-of-current-usage.pdf

After setting the company's goals, managers evaluate capital investment projects and decide which should be funded. Suppose a company has four different capital budgeting projects from which to choose but has constrained funds and cannot implement all of the projects.

The following table contains information about four projects in which X Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about the company's potential project.

Project Investment Net Present Life of Internal Rate Profitability Payback Period Accounting Rate

Required Value Project of Return Index in Years Of Return

A $226,000 $36,908 5 21% 1.17 2.97 20%

B $406,000 $50,740 6 24% 1.13 3.13 15%

C $1,040,000 $152,325 3 19% 1.16 2.18 14%

D $1,630,000 $19,870 4 14% 1.02 3.00 23%

Part 1: Rank the four projects in order of preference by using the following table:

(a) Net Present (b) Profitability (c)Internal Rate (d) Payback (e) Average Rate

Value Index of Return Periodof Return

1st preferred (Which project

A,B,C,D)

2nd preferred

3rd preferred

4th preferred

Part 2

How does theusefulness of capital investment techniques (net present value, profitability index, internal rate of return, payback period, and average rate of return) in selecting the four alternative investment opportunities in part 1?