What is the correct option? General accounting question The management of Orion Industries is considering four investment projects-A, B, C, and D.The initial investment required and the present value of expected cash inflows for each projectare as follows:Project Initial Investment Present Value of Cash InflowsA$120,000$139,200B$75,000$90,000C$200,000$248,000D$150,000$171,000Rank the projects according to the profitability index, from most profitable to least profitable.a. C, B, A, Db. B, C, A, Dc. D, A, B, Cd. C, A, B, D

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Answered: The management of Orion Industries is…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7PA: There are two projects under consideration by the Rainbow factory. Each of the projects will require...

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Similar questions

There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
Jill Harrington, a manager at Jennings Company, is considering several potential capital investment projects. Data on these projects follow: Initial investment Annual cash inflows PV of cash inflows Required: Project X $ 40,000 25,000 45,000 Project Y $ 20,000 10,000 33,000 Project Z $ 50,000 25,400 70,000 1. Compute the payback period for each project and rank order them based on this criterion. 2. Compute the NPV of each project and rank order them based on this criterion. 3. Compute the profitability index of each project and rank order them based on this criterion. 4. If Jennings has limited funds to invest, which ranking should Jill recommend?
Consider the following project-balance profiles for proposed investment projects, where the project-balance figures are rounded to the nearest dollar: (a) Compute the net present worth of each investment.(b) Determine the project balance at the end of period 2 for Project C ifA2 = $500.(c) Determine the cash flows for each project.(d) Identify the net future worth of each project.
Carmen, Inc. is considering three different independent investment opportunities. The present value of future cash flows, initial investment, net present value, and profitability index for each of the projects are as follows: Project A Project B Project C Present value of future cash flows $450,100 $313,100 $405,000 Initial investment 200,000 155,000 190, еее Net present value $250, 100 $158,100 $215,000 Profitability index 2.25 2.02 2.13 In what order should Carmen prioritize investment in the projects? Multiple Cholce С, В, А O A, B, C А, С, В C, A, B
A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Project A $ 11,226 (10,000) Project B $ 10,568 (10,000) a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the net present value of each project. Potential Projects Project A Project B Project C Present value of net cash flows Initial investment Net present value $ $ $
Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Required: 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 dec 2. Rank the proposals in terms of preference. Propoza! A B C D COLONINST Index $(60,000) $(130,000) $(140,000) $(2,100,000) 86,600 181,100 213,900 2,803, 200 703,200 $ 26,600 $ 51,100 $ 73,900 $ 5 years 7 years 6 years 6 years Kana Preference Q Search k < Prev D 4 of 7 SUS N THE
I need help finding the Profitability index for each project (D) using Excel
Perkins Corporation is considering several investment proposals, as shown below: $112,000 $ 134,400 OD, B, C, A OB, D, A, C O A, C, B, D O B, D, C, A B $140,000 $ 210,000 Investment Proposal с $ 84,000 $ 117,600 Investment required Present value of future net cash flows If the profitability index is used, the ranking of the projects from most to least profitable would be: D $ 105,000 $ 216,000
The management of Winstead Corporation is considering the following three investment projects (Ignore income taxes.): Project Q Project R Project S Investment required $ 57,200 $ 97,200 $ 176,000 Present value of cash inflows $ 62,092 $ 111,792 $ 193,320 The only cash outflows are the initial investments in the projects. Required: Rank the investment projects using the project profitability index.
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 1 15,000 6,000 15,000 6,000 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 What is the profitability index of project B? 1.03 1.06 .94 1.01 1.09

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