Capital Rationing Decsion Involving Four ProposalsKopecky Industries Inc. Is considering allocating a limited amount of capital Investment funds among four proposals. The amount of proposed Investment, estimated income from operations, and net cash flow for each proposal are as follows:ProjectUniformvictorSierraTangoNameInvestment $900,000Investment $2,770,865Investment $1,762,515Investment $1,040,013IncomeIncomeIncomeIncomeNet CashNet CashNet CashNet CashfromfromfromfromFlowsFlowsFlowsFlowsYearOperationsOperationsOperationsOperations$84,000$240,000$294,500$950,000$207,000$450,000$109,000$390,00084,500240,000294,775950,000207,000450,000109,000390,00085,000240,000295,050950,000207,000450,000109,000390,00085,500240,000295,325950,000207,000450,000109,000390,0005.86,000240,000295,600950,000207,000450,000109,000390,000Total$425,000$1,200,000 $1,475,250$4,750,000 S1,035,000$2,250,000$545,000$1,950,000Present Value of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.8330.8900.8260.7970.7560.6943.0.8400.7510.7120.6580.57940.7920.6830.6360.5720.4820.7470.6210.5670.4970.4020.7050.5640.5070.4320.3350.6650.5130.4520.3760.2790.6270.4670.4040.3270.233(PrevicCheck My WorkEmail instructorSave and ExitSubmit AsSign out 4.0.7920.683D.6360.5720.4820,7470.6210.5670.4970.4026.0.7050.5640.5070.4320.3357.0.6650.5130.4520.3760.2790.6270.4670.4040.3270.2330.5920.4240.3610.2840.194100.5580.3860.3220.2470.162The company's capital rationing policy requires a maximum cash payback perlod of three years. In addition, a minimum average rate of retun of 20% Is required on all profects. If the preceding standards are met, the net present value mare used to rank the remaining proposals.Required:1. Compute the cash payback period for each of the four proposals. Assume that net cash flows are uniform throughout the year.Cash Payback PeriodProposal Sierra3 years 9 monthsProposal Tango2 years 11 months vProposal Uniform3 years 11 monthsProposal Victor2 years 8 months2. Giving effect to straight-line depreciation on the Investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decmal place.Average Rate of ReturnProposal SlerraProposal TangoProposal UniformProposal VictorMeten thenculte fenm te(a nd.C-Check My WorkEmail InstructorSave and ExitSign c

The capital budgeting is a tool or technique that helps to analyze the profitability of the project…

-Compute the cash payback period for each of the four proposals. Assume that net cash flows are uniform throughout the year. Cash Payback Period Proposal Sierra 3 years 9 months v Proposal Tango 2 years 11 months v Proposal uniform 3 years 11 months Proposal Victor 2 years 8 months v 2. Giving effect to straight-line depreciation on the Investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decmal place. Average Rate of Return Proposal Sierra Proposal Tango

-Compute the cash payback period for each of the four proposals. Assume that net cash flows are uniform throughout the year. Cash Payback Period Proposal Sierra 3 years 9 months v Proposal Tango 2 years 11 months v Proposal uniform 3 years 11 months Proposal Victor 2 years 8 months v 2. Giving effect to straight-line depreciation on the Investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decmal place. Average Rate of Return Proposal Sierra Proposal Tango

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.6.8P

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Capital rationing decision involving four proposals Kopecky Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: The company’s capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on allprojects. 1f the preceding standards are met, the net present value method and presentvalue indexes are used to rank the remaining proposals. Instructions Compute the present value index for each oldie proposals in part (4). Round to two decimal places.
Capital rationing decision for a service company involving four proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: The companys capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1. Compute the cash payback period for each of the four proposals. 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. (Round to one decimal place.) 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the computed amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should be accepted for further analysis and which should be rejected. 4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 15% and the present value table appearing in Exhibit 2 of this chapter. 5. Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). 8. Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $920,000 Proposal B: $320,000 1 $26,000 $90,000 2 26,000 90,000 3 6,000 70,000 4 6,000 70,000 5 (44,000) 20,000 $20,000 $340,000 Proposal C: $108,000 1 $33,400 $55,000 2 31,400 53,000 3 28,400 50,000 4 25,400 47,000 5 23,400 45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2 100,000 180,000 3 80,000 160,000 4 20,000…
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $920,000 Proposal B: $320,000 1 $26,000 $90,000 2 26,000 90,000 3 6,000 70,000 4 6,000 70,000 5 (44,000) 20,000 $20,000 $340,000 Proposal C: $108,000 1 $33,400 $55,000 2 31,400 53,000 3 28,400 50,000 4 25,400 47,000 5 23,400 45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2 100,000 180,000 3 80,000 160,000 4 20,000…
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $ 920,000 Proposal B: $320,000 1 $ 26,000 $ 90,000 2 26,000 90,000 3 6,000 70,000 4 6,000 70,000 5 (44,000) 20,000 $ 20,000 $340,000 Proposal C: $108,000 1 $ 33,400 $ 55,000 2 31,400 53,000 3 28,400 50,000 4 25,400 47,000 5 23,400 45,000 $142,000 $ 250,000…
Capital Rationing Decision for a Service Company Involving Four Proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2 $ 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 240,000 920,000 Proposal B: $320,000 1 $ 26,000 90,000 2 26,000 90,000 3 6,000 70,000 4 6,000 70,000 5 (44,000) 20,000 20,000 340,000 Proposal C: $108,000 1 $ 33,400 55,000 2 31,400 53,000 3 28,400 50,000 4 25,400 47,000 5 23,400 45,000 142,000 250,000 Proposal D: $400,000 1 $ 100,000 180,000 2…
Capital Rationing Decision for a Service Company Involving Four Proposals Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $450,000 1 $ 30,000 $ 120,000 2    30,000    120,000 3    20,000    110,000 4    10,000    100,000 5    (30,000)      60,000 $ 60,000 $510,000 Proposal B: 200,000 1 $ 60,000 $ 100,000 2    40,000     80,000 3      20,000     60,000 4      (10,000)        30,000 5 (20,000)     20,000 $ 90,000 $290,000 Proposal C: $320,000 1 $ 36,000 $ 100,000 2    26,000    90,000 3    26,000    90,000 4    16,000    80,000 5    16,000    80,000 $120,000 $ 440,000 Proposal D: $540,000 1 $92,000 $ 200,000 2   72,000    180,000 3    52,000    160,000 4    12,000…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…