Grosvenor Industries has designated $1.2 million for capital investment expenditures during the upcoming year. Its cost of capital is 14 percent. Any unused funds will earn the cost of capital rate. The following investment opportunities along with their required investment and estimated net present values have been identified: Project Net Investment NPV Project Net Investment NPV A $200,000 $22,000 F $250,000 $30,000 B 275,000 21,000 G 100,000 7,000 C 150,000 6,000 H 200,000 18,000 D 190,000 (19,000) I 210,000 4,000 E 500,000 40,000 J 250,000 35,000 In your response, complete the following: 1. Rank the projects using the profitability index. Considering the limit on funds available, which projects should be accepted? 2. Using the NPV, which projects should be accepted, considering the limit on funds available? 3. If the available investment funds are reduced to only $1,000,000: (a) Does the list of accepted projects change from Part 2? (b) What is the opportunity cost of the eliminated $200,000

Ranking Investment Alternatives (Problem 1041) Grosvenor Industries has designated $1.2 million for capital investment expenditures during the upcoming year. Its cost of capital is 14 percent. Any unused funds will earn the cost of capital rate. The following investment opportunities along with their required investment and estimated net present values have been identified: Project Net Investment Project Net Investment NPV NPV A $200,000 $22,000 F $250,000 $30,000 B 275,000 21,000 G 100,000 7,000 C 150,000 6,000 H 200,000 18,000 D 190,000 (19,000) I 210,000 4,000 E 500,000 40,000 J 250,000 35,000 In your response, complete the following: 1. Rank the projects using the profitability index. Considering the limit on funds available, which projects should be accepted? 2. Using the NPV, which projects should be accepted, considering the limit on funds available? 3. If the available investment funds are reduced to only $1,000,000: (a) Does the list of accepted projects change from Part 2? (b) What is the opportunity cost of the eliminated $200,000 Schneider, A. (2012). Managerial accounting: Decision making for the service and manufacturing sectors (2012). San Diego, CA: Bridgepoint Education