Cases o 1 4 PR 26-6B Capital rationing decision for a service company involving OBJ. 2, 3, 5 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 Investment Year Operations Flow Proposal A: $680,000 $ 64,000 $ 200,000 2 64,000 200,000 3 64,000 200,000 24,000 160,000 5 24,000 160,000 $240,000 $ 920,000 Proposal B: $320,000 $ 26,000 $ 90,000 26,000 90,000 6,000 70,000 6,000 70,000 (44,000) 20,000 $ 20,000 $ 340,000 Proposal C: $108,000 $ 33,400 $ 55,000 31,400 53,000 28,400 50,000 25,400 47.000 23,400 45,000 $142.000 $ 250,000 1 2 3 4 5 - Nm tin B D E F G H K L Payback Period Proposal A: 3 -year 6 -month cash payback period Cumulative Net Cash Flows $ 200,000 Year and Months Year 1 Year 2 Year 3 Year 4 6 months Net Cash Flow 200,000 200,000 full year full year full year $ Proposal B: -year, -month cash payback period Cumulative 1 Net Cash Flow Net Cash Flows 32 33 34 35 Year and Months Year 1 Year 2 Year 3 Year 4