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Citco Company is considering investing up to $465,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. Project A would
Citco Company is considering investing up to $465,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training center in an underserved community, providing jobs and economic security for the local community. Required: 1. Assuming the cost of capital is 10%, complete the table below by computing the payback period, NPV, Profitability Index, and Internal Rate of Return. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your "NPV" answers to the nearest whole dollar amounts. Round your "PI" and "IRR" answers to 2 decimal places.) Required investment Annual cost savings Project life Salvage value Payback period NPV @ 10% Profitability index @ 10% Internal rate of return EA GA Project A (Redesign production process) (465,000) 93,000 86,000 8 years years % Project B (Remodel office building) $ $ GA (558,000) 62,000 62,000 10 years years % Project C (New training facility) $ $ SA (316,000) 79,000 25,000 6 years years % 2. Based strictly on the economic analysis, in which project should they invest? Project A Project B Project C
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