Question
The following capital expenditure projects have been proposed for management's consideration at Scott, Inc., for the upcoming budget year: Use Table 6-4 and Table 6-5.
The following capital expenditure projects have been proposed for management's consideration at Scott, Inc., for the upcoming budget year: Use Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.)
Project | |||||||||||||||||||||
Year(s) | A | B | C | D | E | ||||||||||||||||
Initial investment | 0 | $ | (63,000 | ) | $ | (62,000 | ) | $ | (138,000 | ) | $ | (152,000 | ) | $ | (304,000 | ) | |||||
Amount of net cash return | 1 | 14,000 | 0 | 50,000 | 15,200 | 97,000 | |||||||||||||||
2 | 14,000 | 0 | 50,000 | 30,400 | 97,000 | ||||||||||||||||
3 | 14,000 | 31,000 | 50,000 | 45,600 | 50,000 | ||||||||||||||||
4 | 14,000 | 31,000 | 50,000 | 60,800 | 50,000 | ||||||||||||||||
5 | 14,000 | 31,000 | 50,000 | 76,000 | 50,000 | ||||||||||||||||
Per year | 6-10 | 14,000 | 19,000 | 0 | 0 | 50,000 | |||||||||||||||
NPV (16% discount rate) | $ | 4,665 | $ | ? | $ | ? | $ | ? | $ | 13,115 | |||||||||||
Present value ratio | 1.07 | ? | ? | ? | ? | ||||||||||||||||
Required: a. Calculate the net present value of projects B, C, and D, using 16% as the cost of capital for Scott, Inc. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)
b. Calculate the present value ratio for projects B, C, D, and E. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Which projects would you recommend for investment if the cost of capital is 16% and c-1. $155,000 is available for investment? Project A Project B Project C Project D Project E c-2. $462,000 is available for investment? (Select all that apply.) Project A Project B Project C Project D Project E c-3. $762,000 is available for investment? (Select all that apply.) Project A Project B Project C Project D Project E |
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