Requirements1.2.3.Because the company's cash is limited, Lulus thinks the payback method should be used to choose between thecapital budgeting projects.a. What are the benefits and limitations of using the payback method to choose between projects?b.Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method,which projects should Lulus choose?Bickerson thinks that projects should be selected based on their NPVs. Assume all cash flows occur at the end of theyear except for initial investment amounts. Calculate the NPV for each project. Ignore income taxes.Which projects, if any, would you recommend funding? Briefly explain why.X Lulus Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $12,000,000 for the year. Lyssa Bickerson, staff analyst at Lulus,is preparing an analysis of the three projects under consideration by Caden Lulus, the company's owner.(Click the icon to view the data for the three projects.)Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 tableRead the requirements.Requirement 1. Because the company's cash is limited, Lulus thinks the payback method should be used to choose between the capital budgeting projects.a. What are the benefits and limitations of using the payback method to choose between projects?Benefits of the payback method:O A. Easy to understand and captures uncertainty about expected cash flows in later years of a projectO B. Utilizes the time value of money and computes each project's unique rate of returnOC. Indicates whether or not the project will earn the company's minimum required rate of returnO D. All of the above

PAYBACK PERIOD Payback period is the period in which money invested in capital asset is recovered…

Requirement 1. Because the company's cash is limited, Lulus thinks the payback method should be used to choose between the capital budgeting projects. a. What are the benefits and limitations of using the payback method to choose between projects? Benefits of the payback method: OA. Easy to understand and captures uncertainty about expected cash flows in later years of a project OB. Utilizes the time value of money and computes each project's unique rate of return OC. Indicates whether or not the project will earn the company's minimum required rate of return O D. All of the above

Requirement 1. Because the company's cash is limited, Lulus thinks the payback method should be used to choose between the capital budgeting projects. a. What are the benefits and limitations of using the payback method to choose between projects? Benefits of the payback method: OA. Easy to understand and captures uncertainty about expected cash flows in later years of a project OB. Utilizes the time value of money and computes each project's unique rate of return OC. Indicates whether or not the project will earn the company's minimum required rate of return O D. All of the above

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7MC: Using the information provided, what transaction represents the best application of the present...

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