The ChipTech Company is considering the acquisition of four capital investment projects. The projects under consideration are mutually exclusive. The company is considering buying new design equipment for which each project is identified as Design Pro and Easychip. Also under consideration are two other capital investments which internally are referenced as projects C and D.
The following table describes the financial characteristics of these projects:
1. For each project, calculate (a) the net present value and (b) the excess present value index.
On the basis of the excess present value index only, should ChipTech choose Design Pro or Easychip?
2. Supposing ChipTech must choose one of Design Pro or Easychip, and supposing ChipTech has a capital investment budget of $1,140,000, which projects should ChipTech choose?
3. Comment on your answers to requirements 1 and 2.

  • CreatedJuly 31, 2015
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