Problem 21-24

Because the company's cash is limited, andrews thinks the payback method should the used to choose between the capital budgeting projects a. What are the benefits and limitations of using the payback method to choose between project? b. calculate the payback period for each of the three projects. Ignore incomes taxes Using the grey back method, which projects should andrews choose? 2. Bart thinks that projects should be selected based on their NPVs assume all cash flows occur at the end of the year except for inital investment amounts. Calculate the NPV Assume all cash flows occur at the end of the year except for initial investment amounts. Calculate the NPV for each prohect Ignore in come taxes 3. Which projects, if any, would you recommend funding ? Briefly explain why 21-23 DCF accrual accounting rate of return, working capital, evaluation of performance no income taxes. Century lab plans to purchase a new centrifuge machine for its new hampshire facility the machine costs $137,500 and is expected to have a useful life of 8 years, with a terminal disposal value of $37,500 saving in cash operating costs are expected to be $31,250 per year However, additional working capital is needed to keep the machine running efficiently. The working capital must continually be replaced so an investment of $10,000 needs to be maintained at all times, but this investment is fully revocoverable (will be "cashed in") at the end of the useful life century lab's required rate of return is 14% ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts 1.Calculate net present value 2. Calculate internal rate of return 3. Calculate accrual accounting rate of return based on net initial investment 4. caluculate accrual accounting rate of return based on average investement 5. You hbave the authority to make the purchase decision. Why might you be reluctant to base your decision on the DCF methods