Question
[The following information applies to the questions displayed below.] The following capital expenditure projects have been proposed for management's consideration at Scott, Inc., for the
[The following information applies to the questions displayed below.]
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 | $ | (61,000 | ) | $ | (72,000 | ) | $ | (137,000 | ) | $ | (150,000 | ) | $ | (288,000 | ) | |||||
| Amount of net cash return | 1 | 12,800 | 0 | 46,100 | 14,400 | 87,000 | |||||||||||||||
| 2 | 12,800 | 0 | 46,100 | 28,800 | 87,000 | ||||||||||||||||
| 3 | 12,800 | 28,800 | 46,100 | 43,200 | 44,000 | ||||||||||||||||
| 4 | 12,800 | 28,800 | 46,100 | 57,600 | 44,000 | ||||||||||||||||
| 5 | 12,800 | 28,800 | 46,100 | 72,000 | 44,000 | ||||||||||||||||
| Per year | 6-10 | 12,800 | 17,300 | 0 | 0 | 44,000 | |||||||||||||||
| NPV (12% discount rate) | $ | 8,456 | $ | ? | $ | ? | $ | ? | $ | 22,487 | |||||||||||
| Present value ratio | 1.14 | ? | ? | ? | ? | ||||||||||||||||
rev: 12_21_2016_QC_CS-72735
2.
value: 5.00 points
Required information
Required:
a. Calculate the net present value of projects B, C, and D, using 12% as the cost of capital for Scott, Inc. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)
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3.
value: 3.00 points
Required information
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.)
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4.
value: 1.00 points
Required information
Which projects would you recommend for investment if the cost of capital is 12% and
c-1. $145,000 is available for investment?
Project A
Project B
Project C
Project D
Project E
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5.
value: 2.00 points
Required information
c-2. $438,000 is available for investment? (Select all that apply.)
Project A
Project B
Project C
Project D
Project E
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6.
value: 2.00 points
Required information
c-3. $724,000 is available for investment? (Select all that apply.)
Project A
Project B
Project C
Project D
Project E
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Management Accounting For Business Decisions
Authors: Colin Drury
2nd Edition
1861527705, 978-1861527707
