itco Company is considering investing up to $696,000 in a sustainability hoices to three potential projects. • Project A would redesign the production process to recycle raw mat materials costs and reducing the amount of waste sent to the landfill • Project B would remodel an office building, utilizing solar panels and healthy work environment. Project C would build a new training center in an underserved comm community. .
itco Company is considering investing up to $696,000 in a sustainability hoices to three potential projects. • Project A would redesign the production process to recycle raw mat materials costs and reducing the amount of waste sent to the landfill • Project B would remodel an office building, utilizing solar panels and healthy work environment. Project C would build a new training center in an underserved comm community. .
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject: acounting
Transcribed Image Text:Citco Company is considering investing up to $696,000 in a sustainability-enhancing project. Its managers have narrowed their
choices to three potential projects.
• Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct
materials costs and reducing the amount of waste sent to the landfill.
• Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and
healthy work environment.
• Project C would build a new training center in an underserved community, providing jobs and economic security for the local
community.
Required:
1. Assuming the cost of capital is 8%, complete the table below by computing the payback period, NPV, Profitability Index, and Internal
Rate of Return. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate
factor(s) from the tables provided. Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.
Round your "NPV" answers to the nearest whole dollar amounts. Round your "PI" and "IRR" answers to 2 decimal places.)
Required investment
Annual cost savings
Project life
Salvage value
Payback period
NPV @ 8%
Profitability index @ 8%
Internal rate of return
$
$
Project A
(Redesign
production
process)
$
(696,000)
116,000
8 years
77,000
years
%
Project B
(Remodel office
building)
$
$
$
(711,000)
79,000
10 years
75,000
years
%
Project C
(New training
facility)
$
$
$
(392,000)
98,000
6 years
29,000
years
%
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