The following capital expenditure projects have been proposed for management's consideration at Heard, Inc., for the upcoming budget year:

Required:
a. Calculate the net present value of projects B, C, and D, using 14% as the cost of capital for Heard, Inc.
b. Calculate the present value ratio for projects B, C, D, and E.
c. Which projects would you recommend for investment if the cost of capital is 14% and
1. $100,000 is available for investment?
2. $300,000 is available for investment?
3. $500,000 is available for investment?
d. What additional factors (beyond those considered in parts a–c might influence your projectrankings?

Transcribed Image Text:

Project Yearts) Initial $150,000) $150,000 $100,00 32,000 32,000 investment 0 $(100,000) $(200,000) Amount of 10,000 10.000 0,000 60,000 0 32,000 20,000 60,000 30,000 30,000 10,000 20,000 32,000 40,000 30,000 10,000 20,000 32,000 50,000 30,000 30,000 net cash return1 0 10.000 20,000 4 5 6-10 per year NPV (14% 10,000 12,00O 0 discount rate) $ 2,161 ? ?串5,884 Present value ratio. 1.04