You are a new financial manager and have been tasked with evaluating two projects. Upon evaluation, you are to create a business memo detailing your analysis along with the suggested course of action for the organization. All new financial managers are tasked with analyzing independent projects for the Russell Drilling, LLC. Provide an analysis of two proposed projects, each with a 5-year life and initial outlays of $210,000. Both investments have required rates of return of 12%. Riggs imposes a 3-year maximum acceptable payback period. The expected cash flows are as follows: Riggs Drilling Proposals Project Solar Project Wind Initial outlay $-210,000 $-210,000 1 60,000 65,000 2 65,000 65,000 3 70,000 65,000 4 75,000 65,000 5 80,000 65,000

Riggs Drilling Proposals Project Solar Project Wind Initial outlay $-210,000 $-210,000 1 60,000 65,000 2 65,000 65,000 3 70,000 65,000 4 75,000 65,000 5 80,000 65,000

1. Why is the capital budgeting process important to organizations like Riggs Drilling?