- Data Table al Dari limit B D the 1 Project A Project B Project C alue Projected cash 2 outflow $ 3,000,000 $ 2,100,000 $ 3,000,000 my's o 3 Net initial investment Projected cash Alif budg ns of Data Table - X 1 ari limi Projected cash 4 inflows ng je 5 Year 1 6 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 7 Year 3 8 Year 4 's budge s of + TRITIUWS 5 Year 1 6 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 7 Year 3 8 Year 4 9 Required rate of return 12% 12% 12% Print Done Tid Requirements 1. a. Because the company's cash is limited, Lulus thinks the payback method should be used to choose between the capital budgeting projects. 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 Lulus choose? Bickerson 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. Which projects, if any, would you recommend funding? Briefly explain why, 2. 3. Homework: Ch 21 Hwk Part 1 of 10 Question 10 Score: 0 of 30 points Save Lulus 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 Lon Bickerson, staff analyst at Lulus, is preparing an analysis of the three projects under consideration by Corey Lulus, the company's owner D (Click the icon to view the data for the three projects.) Present Value of 5.1 table Present Value of Annully oc51 table Future Value Stable Future Value Anty 1 tabi Read the suncemen Requirement 1. Because the company's cash is limited, Lulus 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? Benefits of the payback method: TET Requirement 1. Because the company's cash is limited Lulus thinks the payback method should be used to choose between the capital budi pering projects. a. What are the benefits and limitations of using the payback method to choose between projects Benefits of the payback method: Clint re A. Indicates whether or not the project will eam the company's minimum required rate of return B. Utilizes the time value of money and computes each project's unique rate of return c. Easy to understand and captures uncertainty about expected cash flows in later years of a project D. All of the above