Kopecky Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows:

Project Name	Sierra		Tango		Uniform		Victor
	Investment	$751,674	Investment	$2,625,030	Investment	$1,791,650	Investment	$966,680
Year	Income from Operations	Net Cash Flows	Income from Operations	Net Cash Flows	Income from Operations	Net Cash Flows	Income from Operations	Net Cash Flows
1	$77,000	$220,000	$279,000	$900,000	$230,000	$500,000	$108,000	$400,000
2	77,500	220,000	279,275	900,000	230,000	500,000	108,000	400,000
3	78,000	220,000	279,550	900,000	230,000	500,000	108,000	400,000
4	78,500	220,000	279,825	900,000	230,000	500,000	108,000	400,000
5	79,000	220,000	280,100	900,000	230,000	500,000	108,000	400,000
Total	$390,000	$1,100,000	$1,397,750	$4,500,000	$1,150,000	$2,500,000	$540,000	$2,000,000

1. Present Value of $1 at Compound Interest
   Year	6%	10%	12%	15%	20%
   1	0.943	0.909	0.893	0.870	0.833
   2	0.890	0.826	0.797	0.756	0.694
   3	0.840	0.751	0.712	0.658	0.579
   4	0.792	0.683	0.636	0.572	0.482
   5	0.747	0.621	0.567	0.497	0.402
   6	0.705	0.564	0.507	0.432	0.335
   7	0.665	0.513	0.452	0.376	0.279
   8	0.627	0.467	0.404	0.327	0.233
   9	0.592	0.424	0.361	0.284	0.194
   10	0.558	0.386	0.322	0.247	0.162

The company's capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 20% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals.

Required:

1. Compute the cash payback period for each of the four proposals. Assume that net cash flows are uniform throughout the year.

	Cash Payback Period
Proposal Sierra	2 years3 years3 years 5 months3 years 7 monthsunable to determine
Proposal Tango	2 years3 years2 years 11 months2 years 1 monthunable to determine
Proposal Uniform	2 years3 years3 years 7 months3 years 5 monthsunable to determine
Proposal Victor	2 years3 years2 years 5 months2 years 7 monthsunable to determine

2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place.

	Average Rate of Return
Proposal Sierra	fill in the blank 5 %
Proposal Tango	fill in the blank 6 %
Proposal Uniform	fill in the blank 7 %
Proposal Victor	fill in the blank 8 %

3. Using the results from parts (1) and (2) determine which proposals should be accepted for further analysis and which should be rejected.

	Accept / Reject
Proposal Sierra	Accept for further analysisReject
Proposal Tango	Accept for further analysisReject
Proposal Uniform	Accept for further analysisReject
Proposal Victor	Accept for further analysisReject

4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value of $1 table above. If required, use the minus sign to indicate a subtraction or negative net present value.

Select the proposal accepted for further analysis.	Proposal SierraProposal Tango	Proposal UniformProposal Victor
Present value of net cash flow total	$fill in the blank 15	$fill in the blank 16
Amount to be invested	fill in the blank 17	fill in the blank 18
Net present value	$fill in the blank 19	$fill in the blank 20

5. Compute the present value index for each of the proposals in part (4). Round to two decimal places.

Select the proposal to compute present value index.	Proposal SierraProposal Tango	Proposal UniformProposal Victor
Present value index (rounded)	fill in the blank 23	fill in the blank 24

6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4).

Rank 1st	Proposal SierraProposal TangoProposal UniformProposal Victor
Rank 2nd	Proposal SierraProposal TangoProposal UniformProposal Victor

7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5).

Rank 1st	Proposal SierraProposal TangoProposal UniformProposal Victor
Rank 2nd	Proposal SierraProposal TangoProposal UniformProposal Victor

8. Based on your calculations above, complete the statements below.

1. Looking at the present value computations,

   Proposal SierraProposal TangoProposal UniformProposal Victor

   has the larger net present value.

   Proposal SierraProposal TangoProposal UniformProposal Victor

   is attractive in terms of amount of present value per dollar invested. Comparing the two proposals, their present value indices

   have a significant difference (.20 or more)have a moderate rangeare barely different (.08 or less)

   . Lastly,

   Proposal SierraProposal TangoProposal UniformProposal Victor

   has the larger initial investment. Considering all this information, Kopecky should proceed with

   Proposal SierraProposal TangoProposal UniformProposal Victor

   .