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Excess Present Value Index and Average Rate of Return Swanson Corporation is evaluating five different capital expenditure proposals. The companys hurdle rate for net present
Excess Present Value Index and Average Rate of Return Swanson Corporation is evaluating five different capital expenditure proposals. The companys hurdle rate for net present value analysis is 12%. A 15% salvage value is expected from each of the investments. Information on the five proposals is as follows:
I need part A and C answered. Thank you.
Excess Present Value Index and Average Rate of Return Swanson Corporation is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analysis is 12%. A 15% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment Net Present Value Avg. Annual Net Income from Investment $50,000 $8,996 $9,100 80,000 5,812 12,000 110,000 27,034 18,300 150,000 7,544 21,500 72,000 15,822 13,960 a. Compute the excess present value index for each of the five proposals. Round answers to three decimal places. Proposal Excess PV Index b. Compute the average rate of return for each of the five proposals. Round answers to one decimal place. For example, 0.4567 equals 45.7% Proposal Avg. Rate of Return 31.7 % 26.1 % 28.9 % 24.9 % 33.7 % C. Assume that Swanson will commit no more than $200,000 to new capital expenditure proposals. Using the excess present value index, which proposals would be accepted. Select the best answer. Now using the average rate of return, which proposals would be accepted? Select the bestStep by Step Solution
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