Brundage Laine Canine

Project A: Project B:

Cost of Project 1,800,000 1,850,000

Additional Revenue per year 800,000 652,000

Additional Expenses per year

(these expenses do NOT include depreciation expense) 350,000 195,000

Estimated Life 8 7

Residual Value 12,000 11,000

Cost of Capital 14% 12%

additional information: All of the revenue will be received and all of the expenses will be paid by year-end The straight line depreciation method is used.

Report:

Compute the cash payback period, the ARR, and the NPV of each project. (worth 70% of project grade)

Compute the excess present value index for each project. (5%)

Disregarding residual value, what is the approximate IRR for each project? (10%)

Describe the advantages and limitations of evaluating projects using these three methods of capital budgeting: cash payback analysis, ARR, and NPV. (10%)

Which is the better project for your company? Describe your reasons for selecting this project. (5%)

*please show me step by step on how you retrieved each answer. Thank you.