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Q4. Joyce is a new assistant manager in Peace AgBiz. Her boss asked her to evaluate the capital budget opportunities of two potential investments:
Q4. Joyce is a new assistant manager in Peace AgBiz. Her boss asked her to evaluate the capital budget opportunities of two potential investments: Project A and Project B. Joyce has not much knowledge about capital budgeting decision procedures, so she asked you for help. Fill out the following table and then answer the following questions. (10 points in total) (Note: please find "Present Value Factor" from the attached "Present Value of S1 table" Project A Year After Tax Present Benefit (5) Value Factor Project B After Tax After Tax Present present Benefit(S) Value value of Factor After Tax presest value of benefit benefit Year 1 $3,000 Year 2 $5,000 Year 3 $4,000 Year 4 $3,000 Year 5 $4,000 Year 6 $1,000 Total $1,000 $2,000 $3,000 $5,000 $2,000 $2.000 Note: The discount/interest rate is 8% and the initial total cost is $12.000 (1) If the maximum payback period is allowed is 6 years, use the Payback method to find which project should Paul choose. (2 points) (2) If the average yearly investment for both Project A and Project B are $10,000, use the Average Rate of Return method to find the project Paul should choose. (2 points) (3) Use the Net Present Value Method to help Paul make a decision. (2 points) (4) Use the Benefit Cost Ratio to help him make a decision. (2 points)
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