Question

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) $ (75,000) Initial investment Amount of net cash return min $(68,000) 16,000 16,000 16,000 16,000 16,000 16,000 $ 6,538 1.1 $(154,000) 57,000 57,000 57,000 57,000 57,000 $(172,000) 17,200 34,400 51,600 68,800 86,000 36,000 36,000 36,000 21,000 ? $ (344,000) 105,000 105,000 60,000 60,000 60,000 60,000 $ 6,856 6-10 Per year NPV (14% discount rate) Present value ratio $ $ ? $ ? 3. $852,000 is available for investment? (You may select more than one answer. Single click the box with the question mark to oduce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. ny boxes left with a question mark will be automatically graded as incorrect.) Project A Project B Project C Project D Project E

Answer 1

Project ABCE should be selected

Detail working for our easy understanding

	Year	PVF	Project B		Project D		Project C'		Project E'
		A	Cash Flow B	PV AXB	Cash Flow C	PV AXC	Cash Flow D	PV AXC	Cash Flow C	PV AXC
Initial investment	0	1	-$68,000	-$68,000	-$172,000	-$172,000	-$154,000	-$154,000	-$344,000	-$344,000
Net cash return	1	0.8772	$0	$0	$17,200	$15,088	$57,000	$50,000	$105,000	$92,106
	2	0.7695	$0	$0	$34,400	$26,471	$57,000	$43,862	$105,000	$80,798
	3	0.675	$36,000	$24,300	$51,600	$34,830	$57,000	$38,475	$60,000	$40,500
	4	0.5921	$36,000	$21,316	$68,800	$40,736	$57,000	$33,750	$60,000	$35,526
	5	0.5194	$36,000	$18,698	$86,000	$44,668	$57,000	$29,606	$60,000	$31,164
	6	0.4556	$21,000	$9,568	$0	$0	$0	$0	$60,000	$27,336
	7	0.3996	$21,000	$8,392	$0	$0	$0	$0	$60,000	$23,976
	8	0.3506	$21,000	$7,363	$0	$0	$0	$0	$60,000	$21,036
	9	0.3075	$21,000	$6,458	$0	$0	$0	$0	$60,000	$18,450
	10	0.2697	$21,000	$5,664	$0	$0	$0	$0	$60,000	$16,182
NPV				$33,757		-$10,206		$41,692		$43,074
Present value ratio				0.50		0.06		0.27		0.13

Ranking on Base on NPV
Project	Investment	NPV	Rank
A	$68,000	$6,538	IV
B	$75,000	$33,757	III
C	$154,000	$41,692	II
D	$172,000	-$10,206
E	$344,000	$43,074	I