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Fit for Life, a full service fitness center has accumulated $135,000 for capital expenditures during the upcoming year. The accounting manager has received five proposals from various department heads. The company has a 40% tax rate. The following guidelines have been established to evaluate the proposals and determine which will be funded..

1.To be funded, a project must have a payback period of 6 years or less.

2.Projects must have a cash return no less than the company's Required Rate of Return of 6%

3.All projects should be evaluated based on their NPV, Internal Rate of Return, Accounting Rate of Return and Pay Back Method.

4.The project(s) with the highest profitability ratios will be selected for funding.

5.The organization will fund as many projects as possible; however, if the allotment of funds is not depleted, the balance will be carried over to the following year.

1.Members have requested that the center begin offering aerobic classes. There is ample space in the current facility, although some renovation and remodeling would be required - hardwood floors, sound systems, etc. The cost of these physical changes is estimated at $60,000. A market survey reveals that the aerobic classes would draw approximately 899 participants, and each would be willing to pay a monthly fee of $35. An annual cost of offering the classes is estimated at $12,900.