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Calculate the net present value of projects

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Reference no: EM13515612

Calculate NPV-rank projects using present value ratios The following capital expenditure projects have been proposed for management's consideration at Heard, Inc., for the upcoming budget year:


Project


Year(s)

A

B

C

D

E

Initial





investment

0

$(50,000)

$(50,000)

$(100,000)

$(100,000)

$(200,000)

Amount of





net cash return

1

10000

0

32000

10000

60000

.

2

10000

0

32000

20000

60000

.

3

10000

20000

32000

30000

30000

.

4

10000

20000

32000

40000

30000

.

5

10000

20000

32000

50000

30000

Per year

6-10

10000

12000

0

0

30000

NPV (14%





discount rate)

2161

$ ?

$ ?

$ ?

5884

Present





value ratio

1.04

?

?

?

?

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 project rankings?

Reference no: EM13515612

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