# Highpoint Company is evaluating five different capital expenditure proposals. The companys cutoff rate for net present value

## Question:

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?

## Step by Step Answer:

**Related Book For**

## Managerial Accounting For Undergraduates

**ISBN:** 9781618531124

1st Edition

**Authors:** Christensen, Theodore E. Hobson, L. Scott Wallace, James S.