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) McGloire Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. B Project A D |Project C Project B 2 Projected cash outflow Net initial investment 3 $3 000 000 $1 500 000 $4 000 000 5 Projected cash inflows $ 400 000 $2 000 000 $1 000 000 1 000 000 1 000 000 1 000 000 6 Year 1 7 Year 2 Year 3 Year 4 900 000 2 000 000 8 800 000 200 000 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects.

) McGloire Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. B Project A D |Project C Project B 2 Projected cash outflow Net initial investment 3 $3 000 000 $1 500 000 $4 000 000 5 Projected cash inflows $ 400 000 $2 000 000 $1 000 000 1 000 000 1 000 000 1 000 000 6 Year 1 7 Year 2 Year 3 Year 4 900 000 2 000 000 8 800 000 200 000 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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3. Using both Payback and NPV results, which projects, if any, would you
recommend McGloire should fund? Justify your answer and include a critical
assessment of two nonfinancial qualitative factors that could affect the investment

| McGloire Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. A B D Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3 000 000 $1 500 000 $4 000 000 4 5 Projected cash inflows $ 400 000 $2 000 000 2 000 000 Year 1 $1 000 000 1 000 000 1 000 000 1 000 000 7 Year 2 Year 3 900 000 8 800 000 200 000 9. Year 4 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects.
Transcribed Image Text:| McGloire Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. A B D Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3 000 000 $1 500 000 $4 000 000 4 5 Projected cash inflows $ 400 000 $2 000 000 2 000 000 Year 1 $1 000 000 1 000 000 1 000 000 1 000 000 7 Year 2 Year 3 900 000 8 800 000 200 000 9. Year 4 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects.
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