Wise Age Care Home LLC is considering allocating a limited amount of capital investment funds among four proposals $($independent living facility, assisted living facility, memory care facility, and retirement community facility$).$ The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows:

Proposal Investment Year Income from Operations

$($OCF$)$ Total Cash Flows from Assets $($CFFA$)$

Proposal A

$($Independent

living

facility$)$ $$540,0001$ $ $42,000$ $ $150,000$

$2$ $ $42,000$ $ $150,000$

$3$ $ $42,000$ $ $150,000$

$4$ $ $(18,000)$ $ $90,000$

$5$ $ $(18,000)$ $ $90,000$

$ $90,000$ $ $630,000$

Proposal B

$($Assisted

living

facility$)$ $$250,0001$ $ $50,000$ $ $100,000$

$2$ $ $40,000$ $ $90,000$

$3$ $ $30,000$ $ $80,000$

$4$ $ $15,000$ $ $65,000$

$5$ $ $15,000$ $ $65,000$

$ $150,000$ $ $400,000$

Proposal C

$($Memory

Care facility$)$ $$640,0001$ $ $92,000$ $ $220,000$

$2$ $ $82,000$ $ $210,000$

$3$ $ $82,000$ $ $210,000$

$4$ $ $62,000$ $ $190,000$

$5$ $ $32,000$ $ $160,000$

$ $350,000$ $ $990,000$

Proposal D

$($Retirement

Community

facility$)$ $$310,0001$ $ $68,000$ $ $130,000$

$2$ $ $38,000$ $ $100,000$

$3$ $ $(2,000)$ $ $60,000$

$4$ $ $(2,000)$ $ $60,000$

$5$ $ $(2,000)$ $ $60,000$

$ $100,000$ $ $410,000$

The company$$s capital budgeting policy requires a maximum cash payback period of $3$ years. In addition, a minimum average rate of return of $12\%$ is required on all projects. If the preceding standards are met, the Net Present Value $($NPV$)$ method and the Internal Rate of Return $($IRR$)$ methods are used to rank the remaining proposals.

Instructions:

Using Excel $($your work should have clear input page, calculation pages, and output pages$),$ please complete the following:

$1.$ Compute the cash Payback Period for each of the four proposals. Round to nearest month.

$2.$ Compute the cash Discounted Payback Period of the four proposals. Round to nearest month.

$3.$ Giving effect to straight$-$line depreciation on the investments and assuming no estimated residual value, compute the Internal Rate of Return $($IRR$)$ for each of the four proposals. Round to two decimals place.

$4.$ Using the following format, summarize the results of your computations in parts $(1),(2),$ and $(3).$ By placing a check mark in the appropriate column at the right, indicate which proposals should be accepted for further analysis and which should be rejected.

Proposal Payback Period Discounted Payback Period Internal Rate of Return Accept for Further Analysis OR Reject

A

B

C

D

$5.$ For the proposals accepted for further analysis in part $(4),$ compute the Net Present Value $($NPV$).$ Use a rate of $12\%.$ Round to the nearest dollar.

$6.$ Rank the proposals from most attractive to least attractive, based on the Internal Rate of Return $($IRR$)$ computed in part $(3).$

$7.$ Rank the proposals from most attractive to least attractive, based on the Net Present Value $($NPV$)$ computed in part $(5).$

$8.$ Based upon the analyses done above, comment on the relative attractiveness of the proposals ranked in parts $(6)$ and $(7).$ Which provides the most useful results.

$9.$ If you were making the investment decision, show how you would rank the proposals, and by what method you made your decision.

$10.$ What other non$-$financial factors would you consider?