Capital Rationing Decision for a Service Company involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Income from Net Cash Flow Investment Year Operations Proposal A: $680,000 $ 64,000 $ 200,000 64,000 200,000 64,000 200,000 160,000 24,000 24,000 160,000 $240,000 Proposal : $320,000 $ 26,000 26,000 6,000 $ 920,000 $ 90,000 90,000 70,000 70,000 20,000 $340,000 6,000 (44,000) $ 20,000 Proposal C: $100,000 $ 33,400 $ 55,000 31,400 53,000 28,400 50,000 25,400 47,000 23,400 45,000 $142,000 $100,000 Proposal D: $400,000 100,000 80,000 20,000 $ 250,000 $ 180,000 180,000 160,000 100,000 80,000 $300,000 $700,000 The companys capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 1296 is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Present Value of $1 at Compound Interest Year 6% 10% 0.909 0.826 0.751 12% 0.893 0.797 0.712 0.636 15% 0.870 0.756 0.658 0.572 20% 0.833 0.694 0.579 0.482 0.683 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.621 0.497 0.402 0.564 0.567 0.507 0.452 0.404 0.513 0.432 0.376 0.327 0.335 0.279 0.233 0.467 10 0.592 .558 0 0.424 0.386 0.361 0.322 0.284 0.247 0.194 0.162 Required: 1. Compute the cash payback period for each of the four proposals. Cash Payback Period Proposal A Proposal Proposal Proposal 2. Caving to strene depreciation on the westments and sug round your answers to one decomal place a ted resul compute the average rate ofrem for each other Average Rate of Return Proposal Proposal Proposal Proposal 3. Using the following format, summarize the results of your computations in parts (1) and (2) by placing the calculated amounts in the first two columns on the left and indicate which proposals should be accepted for further analysis and which should be rejected. If required, round your answers to one decimal place. 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). Rank Ist Rank 2nd 3. The present value indexes indicate that although Proposal the amount of present value per dollar invested. Proposal before investing in Proposal has the larger net present value, it is not as attractive as Proposal in terms of requires the larger investment. Thus, management should use investment resources for Proposal absent any other qualitative considerations that may impact the decision