A company has a minimum required rate of return of 10 it is

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1- Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:

	Project Soup	Project Nuts
Initial investment	$400,000	$600,000
Annual net income	30,000	46,000
Net annual cash inflow	110,000	146,000
Estimated useful life	5 years	6 years
Salvage value	-0-	-0-

The company requires a 10% rate of return on all new investments.

	Present Value of an Annuity of 1
Periods		9%	10%	11%	12%
5		3.890	3.791	3.696	3.605
6		4.486	4.355	4.231	4.111

SECOND QUESTION

Present Value of an Annuity of 1
Periods	8%	9%	10%
1	0.926	0.917	0.909
2	1.783	1.759	1.736
3	2.577	2.531	2.487

A company has a minimum required rate of return of 10%. It is considering investing in a project that costs $50,000 and is expected to generate cash inflows of $25,000 at the end of each year for three years. The profitability index for this project is?

Selma Inc. is comparing several alternative capital budgeting projects as shown below:

	Projects
	A	B	C
Initial investment	$80,000	$120,000	$160,000
Present value of net cash flows	90,000	110,000	200,000

Using the profitability index, the projects rank as

Reference no: EM13569493

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