eu to eul, S Sdler to stay in Protected View.Enab MULTIPLE CHOICE Choose the one

Question

eu to eul, S Sdler to stay in Protected View.Enab MULTIPLE CHOICE Choose the one alternative that best completes the statemen (5 points each) Table 10-1. Capital Budgeting Choices Capital Cumulatve Net Business Investment tt Present Costs 25,000 53,500 86,000 Value 27,500 35,000 35,000 38,000 Location Cost in$ 25,000 28,500 32,500 32,500 45,000 54,000 63,250 73,000 217,500 280,750 353,750 163,500 (15,000) (10,000) 92,000 100,000 1) Refer to Table 10-1. Glen Write owns an engineering firm. He asked his employees for suggestions regarding equipment they thought the firm would need during the next year. They suggested the purchase of eight pieces of equipment Clen calculated the net present value of each recommendation. Glen estimates that he will have no more than $150,000 to invest next year Based on NPV, which of the following items should he purchase? A) 1, 2, & 8 B) 2, 3, & 7 C) 1,2,3, 4 D)7 & 8

Explanation / Answer

Alternative D should be selected as it has highest Net present value

Option Project Capital Investment NPV Reject/ Accept A 1, 2, 8 $ 126,500.00 $ 162,500.00 Rejected B 2, 3,7 $ 124,250.00 $ 162,000.00 Rejected C 1, 2, 3 ,4 $ 118,500.00 $ 135,500.00 Rejected D 7, 8 $ 136,250.00 $ 192,000.00 Accepted

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