the management team of Ogopogo Ltd. has the following potential projects available to its production business.

PROJECT #1 - New feeder machine

Cost$180,000

Cost savings per year$55,000

Life of machine5 years

Salvage$10,000

Project #2 - New packaging machine

Cost$100,000

Cost savings per year$32,000

Life of machine5 years

Salvage$20,000

Project #3 - New processing line

Cost$200,000

Cost savings per year$60,000

Life of machine5 years

Salvage$0

Ogopogo has alternate investments that earn 15% .

REQUIRED:

PART 1

To help management decide on its capital budgeting planning for next year, you have been asked to provide guidance as to prioritizing the projects. Provide the following:

NPV for each project

Profitability index for each project

Order of priority for the projects

PART 2

Calculate the simple payback in years for each project. Ignore salvage values.