Quick question, short responses needed.

Business & Finance
Price: $10 USD

Question description

(Problem 10-41) Grosvenor Industries has designated $1.2 million for capital investment expenditures during the upcoming year.  Its cost of capital is 14 percent.  Any unused funds will earn the cost of capital rate.  The following investment opportunities along with their required investment and estimated net present values have been identified:

Project   Net Investment    NPV    Project   Net Investment    NPV 

  A    $200,000   $22,000  F  $250,000  $30,000

      B  275,000    21,000 G    100,000    7,000

      C    150,000    6,000 H    200,000    18,000

      D     190,000    (19,000) I    210,000    4,000

  E 500,000     40,000    J  250,000  35,000

In your response, complete the following:

1. Rank the projects using the profitability index.  Considering the limit on funds available, which projects should be accepted?

2. Using the NPV, which projects should be accepted, considering the limit on funds available?

3. If the available investment funds are reduced to only $1,000,000:

  (a)    Does the list of accepted projects change from Part 2?

  (b)  What is the opportunity cost of the eliminated $200,000

Tutor Answer

(Top Tutor) Daniel C.
School: Cornell University
Studypool has helped 1,244,100 students
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1819 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors