• A) Determine the net present value for each project assuming all cash flow cease after 5 years.

  B) Which project should hocus pocus invest in and why?

  C) If hocus pocus had a capital budget limit of 2,300,000, how should they invest it?

CHIcal TIMIKUTY CT-1 LO 134 Hocus Pocus Company wants to increase sales by adding a new product line. The company is considering three different projects. However, its capital budget is limited to $1,500,000. In addition, the company requires a rate of return of 10%. The information concerning the three product lines is given below. Broomsticks $1,170,000 Magic Wands $983,000 Crystal Balls $2,210,000 Net Initial Investment Budgeted Income Statement for the next five years: Sales Cost of Goods Sold Gross Margin Marketing and Administrative Expenses Net Income* $500,000 80,000 420,000 100,000 $450,000 50,000 400,000 130,000 $650,000 32,000 618,000 22.000 *Assume all amounts stated on the budgeted income statement are cash items