Question

Required information [The following information applies to the questions displayed below.] 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 OWNO $(68,000) 16,000 16,000 16,000 16,000 16,000 16,000 $ 6,538 1.1 36,000 36,000 36,000 21,000 ? $(154,000) 57,000 57,000 57,000 57,000 57,000 0 $ ? $ (172,000) 17,200 34,400 51,600 68,800 86,000 0 ? $ (344,000) 105,000 105,000 60,000 60,000 60,000 60,000 $ 6,856 Per year NPV (14% discount rate) Present value ratio $ . Calculate the present value ratio for projects B, C, D, and E. (Do not round intermediate calculations. Round your answers to 2 ecimal places.) Project Present Value Ratio

Answer 1

Based on Project A the discount factor should be 17% and not 14% as given in question

Accordingly answer is given below for 17% cost of capital

Year Initial Investment Amount of net cash return 0 $75,000 Cash outflow Cash inflow Cash inflow Cash inflow Cash inflow Cash inflow Cash inflow Pv Factor 17% 1.0000 0.8547 0.7305 0.6244 0.5337 0.4561 1.4593 A $68,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 NPVB $68,000 $13,675 $11,688 $9,990 $8,538 $7,298 $23,348 $6,538 Projects NPV C NPV $75,000 - $154,000 -$154,000 $57,000 $48,718 $57,000 $41,639 $22,477 $57,000 $35,589 $19,211 $57,000 $30,418 $16,420 $57,000 $25,998 $30,644 $13,753 $28,363 1.18 1.18 D -$172,000 $17,200 $34,400 $51,600 $68,800 $86,000 NPV -$172,000 $14,701 $25,130 $32,218 $36,715 $39,226 E L -$344,000 $105,000 $105,000 $60,000 $60,000 $60,000 $60,000 $36,000 $36,000 $36,000 $21,000 NPV $344,000 $89,744 $76,704 $37,462 $32,019 $27,367 $87,555 $6,856 1.02 6-10 SO For year NPV ( 17% discount rate) Present value ratio $24,011 1.10 0.86 Project Present Value Ratio 1.10 1.18 1.18 0.86 1.02