Answered step by step
Verified Expert Solution
Question
1 Approved Answer
iPad 10:36 PMM i mybusinesscourse.com 33% . BusinessCourse E Menu Rachel Wilson- CLICK HERE TO REVIEW LEARNING OBJECTIVES QUESTION 1 Not yet answed Marked out
iPad 10:36 PMM i mybusinesscourse.com 33% . BusinessCourse E Menu Rachel Wilson- CLICK HERE TO REVIEW LEARNING OBJECTIVES QUESTION 1 Not yet answed Marked out of 12.00 Flag question Excess Present Value Index and Average Rate of Return Highpoint Company is evaluating five different capital expenditure proposals. The company's cutoff rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment $270,000 200,000 160,000 180,000 128,000 $310,030 236,780 173,040 216,300 136,990 $37,400 26,000 19,200 27,600 14,960 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 c. Assume that Highpoint will commit no more than $500,000 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 best answer Save Answers Finish attempt
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started