Accounting
: Master
: Essay
: English (U.S.)
: 1 pages/275 words One source apa format

Due in 15 hours

Required Resources

Text

Schneider, A. (2017). Managerial Accounting: Decision making for the service and manufacturing sectors (2nd ed.) [Electronic version]. Retrieved from https://content.ashford.edu/

  • Chapter 9:  Managerial Decisions: Analysis of Relevant Information
  • Chapter 10:  Capital Investment Decisions

 Ranking Investment Alternatives

(Problem 10-41) Grosvenor Industries has designated $1.2 million for capital investment expenditures during the upcoming year.  Its cost of capital is 14 percent.  Any unused funds will earn the cost of capital rate.  The following investment opportunities along with their required investment and estimated net present values have been identified:

ProjectNet InvestmentNPVProjectNet InvestmentNPVA$200,000$22,000F$250,000.00$30,000.00B$275,000$21,000G$100,000.00$7,000.00C$150,000$6,000H$200,000.00$18,000.00D$190,000-$19,000I$210,000.00$4,000.00E$500,000$40,000J$250,000.00$35,000.00

In your response, complete the following:

  • Rank the projects using the profitability index. Considering the limit on funds available, which projects should be accepted?
  • Using the NPV, which projects should be accepted, considering the limit on funds available?
  • If the available investment funds are reduced to only $1,000,000:
    • Does the list of accepted projects change from Part 2?
    • What is the opportunity cost of the eliminated $200,000?
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