E21-27 (book/static) Question Help Andrews Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Bart, staff analyst at Andrews, is preparing an analysis of the three projects under consideration by Corey Andrews, the company's owner. (Click the icon to view the data for the three projects.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Because the company's cash is limited, Andrews thinks the payback method should be used to choose between t a. What are the benefits and limitations of using the payback method to choose between projects? Data Table Benefits of the payback method- Requirements 1. Because the company's cash is limited, Andrews thinks the payback method should be used to choose between the capital budgeting projects. a. What are the benefits and limitations of using the payback method to choose between projects? b. Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method, which projects should Andrews choose? - X B C - X 1 Project A D Project B Project C 2 Projected cash outflow 3 Net initial investment $ 3,000,000 $ 1,500,000 $ 4,000,000 4 Projected cash inflows 5 Year 1 $ 1,000,000 $ 400,000 $2,000,000 6 Year 2 1,000,000 900,000 2,000,000 7 Year 3 1,000,000 800,000 200,000 8 Year 4 1,000,000 100,000 9 Required rate of return 10% 10% 10% 2. Bart thinks that projects should be selected based on their NPVs. Assume all cash flows occur at the end of the year except for initial investment amounts. Calculate the NPV for each project. Ignore income taxes. 3. Which projects, if any, would you recommend funding? Briefly explain why. ProjectA years Project B years Project C years Print Done Enter any number in the edit fields and then click Check Answer. 7 parts Clear All Print Done Check Answer