Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. •Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. • Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training facility in an underserved community, providing jobs and economic security for the local community. Required: 1. Assuming the cost of capital is 14 percent, complete the table below by computing the payback period, NPV, profitability index, and internal rate of return. (Future Value of $1, Present Value of $1, Future Value Annuity of $1. Present Value Annuity of $1.) 2. Based strictly on the economic analysis, in which project should they invest?

Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. •Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. • Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training facility in an underserved community, providing jobs and economic security for the local community. Required: 1. Assuming the cost of capital is 14 percent, complete the table below by computing the payback period, NPV, profitability index, and internal rate of return. (Future Value of $1, Present Value of $1, Future Value Annuity of $1. Present Value Annuity of $1.) 2. Based strictly on the economic analysis, in which project should they invest?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 20P: The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting,...

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Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training center in an underserved community, providing jobs and economic security for the local community. Required:1. Assuming the cost of capital is 12%, complete the table below by computing the payback period, NPV, profitability index, and internal rate of return. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate…
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Amold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements by body builders. The project requires use of an existing warehouse, which the firm acquired three years ago for $1 million and which it currently rents out for $127,000. Rental rates are not expected to change going forward. In addition to using the warehouse, the project requires an upfront investment into machines and other equipment of $1.5 million. This investment can be fully depreciated straight-line over the next 10 years for tax purposes. However, Amold Inc. expects to terminate the project at the end of eight years and to sell the machines and equipment for $446,000. Finally, the project requires an initial investment into net working capital equal to 10 percent of predicted first-year sales. Subsequently, net working capital is 10 percent of the predicted sales over the following year. Sales of protein bars are expected to be $4.6 million in the first year and to stay constant…
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