Question

The following table contains information about four projects in which Renkas Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about their potential project Click the icon to view the projects information) Requirements 1. Rank the four projects in order of preference by using the a net present value project profitability Index internal rate of return d. payback period e accounting of return 2. Which methods) do you think is best for evaluating capital investment projects in general? Why? Requirement 1. Rank the projects in order of preference Net Present Value 1st preferred 2nd preferred 3rd preferred 4th preferred Data Table Payback Period Accounting Rate in Years of Return 2.82 20 % Investment Net Present Life of Proiect Required Vue Project A.....$ 220,000 $ 61,190 5 B......$ 410,000 $ 37,744 6 C.....$ 1,030,000 $ 191,498 3 D ...$ 1,545 000 $ 52.680 4 internal Rate Profitability of Return i ndex 23% 1.28 2 2% 1.09 1 8% 1.19 12 103 320 2.17 16% 11 % 24% 307 Print Done Choose from any drop-down list and then click Check Answer 6 pertaining Clear All Check Ane

Answer 1

1. Ranking the projects a) Net present value Puoret C - NPV $191,498 1st puetereed - and preferred - grd puetened 4th puefelled $61,190 $ 52,680 $ 37,744 to project puofitability index. Puojelt P2 18L - O - 1.28 and – e – 1:19 god - B - 1.09 D – 1:03 c) internal rate of 1st - deten Puoject ERR 23cy. A - 23% 2 B-gay. and 187. c - 187 120 - 125. ath - d) pay back period 1st - Puojell c - A - D- and - PIB 2-17 2.82 3.07 3.20 and - 4th - B -

e) Accounting nak of enteen Pucu 782 24V 20% H – and gård – - B - 16% lly 4th 1. NPV method is best capitare budgeting method Reason: -Now gives comportance to the time value of money. et determines how much cash coile Hoco in as a descut of the investment. - profitability and risk of the puorelts are given high priority. 2. Internal uate of uate. Reaione! - & considers time raku of money - & twier to arrive at the rate of at which funds are invested in the coceed be aepaid out of cash inflocis. intelep puojet 3. Payback period. Ricarons. - & specifies the time period cocthin conich the initial investment can be recoveed colta gercated couh entlows: with simple calculation selection of veject of puo cat can be done.