Tesla Company uses a 12% hurdle rate for all capital expenditures. It screens investments using three evaluation techniques: the net present value, the profitability index and the internal rate of return. It has lined up four projects with the following information. Projects in thousands A B C D 400 596 496 544 Initial cash outflow Annual cash inflows Year 1 2 140 130 200 160 190 270 190 250 180 180 180 3 4 130 160 120 If Tesla Company has a capital budget of P1,500,000, what projects should be pursued base on the three criteria? Show necessary computations on your solution. (Present the projects to be accepted with the highest IRR to the least IRR (CAPITAL LETTER ONLY WITH NO SPACES PROVIDED (EX: A-B-C-D)

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Q: Does the Analysis Period Equal Project Lives?

A: Yes, the analysis period equals the project lives.

Q: How does the higher project risk reflect a higher anticipated variability in a project's NPW?

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Q: Which is the most efficient analysis method used to determine the project acceptability on an…

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Q: Describe the Project selection rules under the IRR criterion?

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Q: Accounting

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Q: Management would consider a project when IRR is greater than the RRR

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Q: How can we aggregate the risk over the project life in terms of net present value?

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A: The given statement is true.

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A:

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.