Question

*[The following information applies to the questions
displayed below.]*

The following capital expenditure projects have been proposed for
management's consideration at Scott, Inc., for the upcoming budget
year: Use Table 6-4 and Table 6-5. **(Use appropriate
factor(s) from the tables provided. Round the PV factors to 4
decimals.)**

Project | |||||||||||||||||||||

Year(s) | A | B | C | D | E | ||||||||||||||||

Initial investment | 0 | $ | (61,000 | ) | $ | (72,000 | ) | $ | (137,000 | ) | $ | (150,000 | ) | $ | (288,000 | ) | |||||

Amount of net cash return | 1 | 12,800 | 0 | 46,100 | 14,400 | 87,000 | |||||||||||||||

2 | 12,800 | 0 | 46,100 | 28,800 | 87,000 | ||||||||||||||||

3 | 12,800 | 28,800 | 46,100 | 43,200 | 44,000 | ||||||||||||||||

4 | 12,800 | 28,800 | 46,100 | 57,600 | 44,000 | ||||||||||||||||

5 | 12,800 | 28,800 | 46,100 | 72,000 | 44,000 | ||||||||||||||||

Per year | 6-10 | 12,800 | 17,300 | 0 | 0 | 44,000 | |||||||||||||||

NPV (12% discount rate) | $ | 8,456 | $ | ? | $ | ? | $ | ? | $ | 22,487 | |||||||||||

Present value ratio | 1.14 | ? | ? | ? | ? | ||||||||||||||||

rev: 12_21_2016_QC_CS-72735

2.

value:

**5.00 points**

Required information

**Required:**

**a.** Calculate the net present value of projects
B, C, and D, using 12% as the cost of capital for Scott, Inc.
**(Negative amounts should be indicated by a minus sign. Do
not round intermediate calculations.)**

References

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3.

value:

**3.00 points**

Required information

**b.** Calculate the present value ratio for
projects B, C, D, and E. **(Do not round intermediate
calculations. Round your answers to 2 decimal places.)**

References

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4.

value:

**1.00 points**

Required information

Which projects would you recommend for investment if the cost of capital is 12% and

**c-1.** $145,000 is available for investment?

Project A

Project B

Project C

Project D

Project E

References

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5.

value:

**2.00 points**

Required information

**c-2.** $438,000 is available for investment?
**(Select all that apply.)**

Project A

Project B

Project C

Project D

Project E

References

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6.

value:

**2.00 points**

Required information

**c-3.** $724,000 is available for investment?
**(Select all that apply.)**

Project A

Project B

Project C

Project D

Project E

Answer #1

a.NPV for project B

= 28,800*PVF(12%, 3years) + 28,800*PVF(12%, 4years)+ 28,800*PVF(12%, 5years) + 17,300*PVAF(12%, 6-10 years) – 72,000

= 28,800*0.712 + 28,800*0.636 + 28,800*0.567 + 17,300*2.045 – 72,000

= $18,530.5

Present Value Ratio = 1.26

Project C = 46,100*PVAF(12%, 5 years) – 137,000

= $29,191

PV Ratio = 1.21

Project D = 14,400*0.893 + 28,800*0.797 + 43,200*0.712 + 57,600*0.636 + 72,000*567 – 150,000

= (5,971.2)

Project E : PV ratio = 1.08

Note: Present Value ratio = Present value of cash inflows/Initial investment

c-1

Available funds = $145,000

Select Project c

c-2

Funds = $438,000

Select A, B and C

c-3

Select A, B, C and E

Do not select D in any case since its NPV is negative

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rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765
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rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765,
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rev: 04_20_2017_QC_CS-86552
3.
value:
2.50 points
Required information
Required:
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