The independent project estimates below have been developed by the engineering and finance managers at Golphanen Enterprises. The corporate MARR is 8% per year, and the capital investment limit set by the CFO is $4 million. As a new employee in the Engineering Department, you have been asked to recommend the economically best projects. Use (a) hand solution, and (b) spreadsheet solution to determine your recommendation. Project Cost, Life, NCF, Project $ Millions Years $ per Year 1 −1.5 8 360,000 2 −3.5 10 600,000 3 −1.8 5 520,000 4 −2.0 4 820,000

The independent project estimates below have been developed by the engineering and finance managers at Golphanen Enterprises. The corporate MARR is 8% per year, and the capital investment limit set by the CFO is $4 million. As a new employee in the Engineering Department, you have been asked to recommend the economically best projects. Use (a) hand solution, and (b) spreadsheet solution to determine your recommendation. Project Cost, Life, NCF, Project $ Millions Years $ per Year 1 −1.5 8 360,000 2 −3.5 10 600,000 3 −1.8 5 520,000 4 −2.0 4 820,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 23P

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Concept explainers

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.

Question

The independent project estimates below have
been developed by the engineering and finance
managers at Golphanen Enterprises. The corporate
MARR is 8% per year, and the capital investment
limit set by the CFO is $4 million. As a
new employee in the Engineering Department,
you have been asked to recommend the economically
best projects. Use (a) hand solution, and
(b) spreadsheet solution to determine your
recommendation.
Project Cost, Life, NCF,
Project $ Millions Years $ per Year
1 −1.5 8 360,000
2 −3.5 10 600,000
3 −1.8 5 520,000
4 −2.0 4 820,000

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