Highpoint Company is evaluating five different capital expenditure proposals. The company’s cutoff rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows:

Required

a. Compute the excess present value index for each of the five proposals.

b. Compute the average rate of return for each of the five proposals.

c. Assume that Highpoint will commit no more than \($500,000\) to new capital expenditure proposals. Using the excess present value index, which proposals would be accepted? Using the average rate of return, which proposals would be accepted?

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ABCDE Proposal A. Required Investment Cash Flows $270,000 $310,030 Present Value at 12% of After-tax Average Annual Net Income from Investment $37,400 200,000 236,780 26,000 C. 160,000 173,040 19,200 D. 180,000 216,300 27,600 128,000 136,990 14,960