A business is considering the following three capital expenditure proposals: Proposal A - An investment of ($

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A business is considering the following three capital expenditure proposals:

Proposal A - An investment of \(\$ 15000\) promising cash receipts of \(\$ 5400\) per year for five years.

Proposal B - An investment of \(\$ 15000\) promising a single cash receipt of \(\$ 30000\) after five years.

Proposal C - An investment of \(\$ 15000\) promising a cash receipt of \(\$ 3000\) each year for four years and \(\$ 18000\) in the fifth year.

Required:

a Prepare an analysis to determine the acceptability of each of the capital expenditure proposals, assuming a 16 per cent minimum required rate of return.

b If only one of the three proposals can be selected for investment, which one should it be? Write a brief justification for your selection.

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Accounting Information For Business Decisions

ISBN: 9780170253703

2nd Edition

Authors: Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh, Geoff Slaughter, Sharelle Simmons

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