B. CAPITAL BUDGETINGSituation: Assume that you are planning to invest for the expansion of your business. You consider thetwo projects: large expansion which costs PHP 1,100,000 and medium expansion which costsPHP500,000. The discount rate is 8% annually. You are task to do the following. Also, you interpret yourresult (for problem solving).1. Calculate the NPV for Large Expansion2. Calculate the NPV for Medium Expansion3. Calculate the IRR for Large Expansion4. Calculate the IRR for Medium Expansion5. Calculate the Profitability Index for Large Expansion6. Calculate the Profitability Index for Medium Expansion7. Calculate the Payback period for Large Expansion8. Calculate the Payback period for Medium Expansion9. Create an Evaluation Summary indicating the NPV, IRR, PI, and Payback period of all options.Please see the PDF lecture notes or lecture video for the guide.10. Based on the NPV, IRR, PI, and Payback period of each project option, what is the best option forthe expansion of your business? Discuss your answer.Project ALarge ExpansionProject BMedium ExpansionParticularsInitial Investment OutlayPHP 1,100,000PHP 500,000Cash InflowsYear 1PHP 250,000PHP 100,000Year 2PHP 300,000PHP 120,000PHP 150,000PHP 170, 000Year 3PHP 350,000Year 4PHP 400,000

NPV stand for Net present value, It can be calculated as follows NPV = Present Value of Cash inflows…

B. CAPITAL BUDGETING Situation: Assume that you are planning to invest for the expansion of your business. You consider the two projects: large expansion which costs PHP 1,100,000 and medium expansion which costs PHP500,000. The discount rate is 8% annually. You are task to do the following. Also, you interpret your result (for problem solving). 1. Calculate the NPV for Large Expansion 2. Calculate the NPV for Medium Expansion

B. CAPITAL BUDGETING Situation: Assume that you are planning to invest for the expansion of your business. You consider the two projects: large expansion which costs PHP 1,100,000 and medium expansion which costs PHP500,000. The discount rate is 8% annually. You are task to do the following. Also, you interpret your result (for problem solving). 1. Calculate the NPV for Large Expansion 2. Calculate the NPV for Medium Expansion

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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