Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $ 5,000,000 for the year. Lori Babson, staff analyst at Halls, is preparing an analysis of the three projects under consideration by Corey Halls, the company's owner.

Homework: Chapter 21 Homework Save Score: 0.2 of 3 pts 7 9 of 12 (10 complete) HW Score: 52.67%, 15.8 of 30 pts %E21-27 (similar to) Question Help i Data Table - X Blysis of Halls Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is the three projects under consideration by Corey Halls, the company's owner. (Click the icon to view the data for the three projects.) Requirements Project A Project B Project C Projected cash outflow Net initial investment bital $3,000,000 $2,100,000 $ 3,000,000 Projected cash inflows Year 1 1. Because the company's cash is limited, Halls thinks the payback method should be used to choose between the capital budgeting projects. a. What are the benefits and limitations of using the payback method to choose between projects? b. Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method, which projects should Halls choose? 2. Babson thinks that projects should be selected based on their NPVs. Assume all cash flows occur at the end of the year except for initial investment amounts Calculate the NPV for each project. Ignore income taxes 3. Which projects, if any, would you recommend funding? Briefly explain why Year 2 $ 1,200,000 $ 1,200,000 $ 1,700,000 1,200,000 600,000 1,700,000 1,200,000 500.000 200.000 1,200,000 100,000 Year 3 Year 4 Print Print Done Required rate of return 6% 6% 6% 7 parts Clear All Print Done I remaining