The following table contains information about four potential investment projects that Castle Corporation is considering. Required Investment $ 780,000 $ 1,030,000 C$ 1,280,000 D $ 1,700,000 Project A B Project Life 5 4 1st preferred 2nd preferred 3rd preferred 4th preferred ARR 30.00% 19.50% 15.00% 17.70% Payback Period 3.8 4.2 3.9 3.1 Required: 1. Rank the four projects in order of preference under each method indicated by the headers: 2. Which method is the best for evaluating the investments? Complete this question by entering your answers in the tabs below. NPV $ 346,750 $366,562 $ 218,420 $ 247,758 Required 1 Required 2 Rank the four projects in order of preference under each method indicated by the headers: Accounting Rate of Return Payback Net Present Period Value Profitability Index < Required 1 Required 2 > Profitability Index 2.66 2.10 1.44
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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


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