BUS 630 Week 5 Discussion 2 Ranking Investment Alternatives

Question Details: #21971
BUS 630 Week 5 Discussion 2 Ranking Investment Alternatives

BUS630 Week5 DQ2 Ranking Investment Alternatives Ranking Investment Alternatives. (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? Guided Response: Review several of your classmates’ postings. Respond to at least two of your classmates by commenting on common responses in the ranking of the projects and by posing a question to challenge their rankings.
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Solution Details: #22008
BUS630 Week 5 Discussion 2 Ranking Investment Alternatives

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