Akron Transportation Service is operating under capital rationing, and expects to be in a capital rationing environment for 3 years. The cost of capital is 10%. A $100,000 capital investment will provide cash flows of $30,000 at the end of each year for 5 years. Funds not used immediately can be invested until the end of the capital rationing period at a 20% annual return. Funds available at the end of the first year can be invested at 18% until the end of the rationing period, and funds available at the end the second year can be invested for 1 year at 15%. Is that capital investment attractive? Why?
Akron Transportation Service is operating under capital rationing, and expects to be in a capital rationing...
-NM PR 11-6B Capital rationing decision for a service company involving Obj. 2, 3,5 four proposals Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Income from Net Cash Investment Year Operations Flow Proposal A: $450,000 $ 30,000 $120,000 30,000 120,000 20,000 110,000 10,000 100,000 (30,000) 60,000 $ 60,000 $510,000 Proposal B: $200,000 $...
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $ 920,000 Proposal B: $320,000 1 $ 26,000...
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $ 920,000 Proposal B: $320,000 1...
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $ 920,000 Proposal B: $320,000 1...
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $ 920,000 Proposal B: $320,000 1 $ 26,000...
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $ 920,000 Proposal B: $320,000 1...
Capital Rationing Decision for a Service Company Involving Four Proposals Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated Operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $450,000 1 $30,000 $120,000 2 30,000 120,000 3 20,000 110,000 4 10,000 100,000 5 (30,000) 60,000 $60,000 $510,000 Proposal B: $200,000 1 $60,000 $100,000 2 40,000 80,000...
Engineers for a public utility company have proposed two alternate plans to provide a certain service for the next 15 years. Each plan includes sufficient facilities to take care of the expected growth in demand for the utility service during this period. Plan A calls for a threestage program of investment in facilities: $60,000 will be invested at once, $50,000 more after 5 years, and $40,000 more after 10 years. Plan B calls for an initial investment of $90,000 followed...
please explain! thank you 41 Capital Budgeting Exercises: Inree independent projects are under consideration for capital budgeting purposes. Their respective initial investment, cost of capital, and cash flows are provided below. Use the following capital budgeting techniques to evaluate all three projects and indicate which project should be undertaken, assuming there is no budget constraint A. Payback period method Discounted payback period method Net present value method IRR method B. C. D. Project 1 Project 2 Project 3 Initial Investment...
Construct a spreadsheet that compares the cash flows resulting from two plans. Under the first plan net baht denominated cash flows (received today) will be invested in Thailand at 15 percent for one year period, after which the bah will be converted to Australian dollars. The expected spot rate for the Baht in one year is about A%0.0361 (Ben Holts plan). Under the second plan, net baht denominated cash flows are converted to Australian dollars and ind immediately invested in...