Question

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		$	(57,000	)		$	(64,000	)		$	(128,000	)		$	(128,000	)		$	(265,000	)
Amount of net cash return	1			12,000				0				41,000				12,800				77,000
	2			12,000				0				41,000				25,600				77,000
	3			12,000				25,600				41,000				38,400				42,000
	4			12,000				25,600				41,000				51,200				42,000
	5			12,000				25,600				41,000				64,000				42,000
Per year	6-10			12,000				15,400				0				0				42,000
NPV (14% discount rate)			$	3,225			$	?			$	?			$	?			$	2,688
Present value ratio				1.06				?				?				?				?
a. Calculate the net present value of projects B, C, and D, using 14% as the cost of capital for Scott, Inc. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) 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.)

Answer 1

Answer

1.

2.

Present Value Index
Project	PV of Cash Inflows (A)	Initial Cash Outflow (B)	Index (A / B)
A	62,580.00	57,000.00	1.10
B	73,179.80	64,000.00	1.14
C	140,712.00	128,000.00	1.10
D	120,358.40	128,000.00	0.94
E	276,640.00	265,000.00	1.04

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