Question: Assume that six projects A to F in the table

Assume that six projects, A to F in the table that follows, have been submitted for inclusion in the coming year's budget for capital expenditures:
1. Compute the internal rates of return (to the nearest half-percent) for projects B, C, and D.
Rank all projects in descending order in terms of the internal rate of return. Show your computations.
2. On the basis of your answer in requirement 1, state which projects you would select, assuming a 10% required rate of return (a) if $600,000 is the limit to be spent, (b) if $660,000 is thelimit, and (c) if $780,000 is the limit.
3. Assuming a 16% required rate of return and using the net present value method, compute the net present values and rank all the projects. Which project is more desirable, C or D?
Compare your answer with your ranking in requirement 1.
4. What factors other than those considered in requirements 1 to 3 would influence your project rankings? Be specific.

  • CreatedJuly 31, 2015
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