Posted: October 24th, 2022

Why or why not?

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Prior to beginning work on this discussion, please read the article Capital Investment Appraisal Techniques: A Survey of Current UsageLinks to an external site. by Sangster (1993).
After setting the company’s goals, managers evaluate capital investment projects and decide which should be funded. Suppose a company has four different capital budgeting projects from which to choose but has constrained funds and cannot implement all of the projects.
The following table contains information about four projects in which X Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about the company’s potential project.
Project
Investment Required
Net Present Value
Life of Project
Internal Rate of Return
Profitability Index
Payback Period in Years
Accounting Rate of Return
A
$ 226,000
$ 36,908
5
21%
1.17
2.97
20%
B
$ 406,000
$ 50,740
6
24%
1.13
3.13
15%
C
$1,040,000
$152,325
3
19%
1.16
2.18
14%
D
$1,630,000
$ 19,870
4
14%
1.02
3.00
23%
Part 1: Rank the four projects in order of preference by using the following table:
(a)
Net Present Value
(b)
Profitability Index
(c)
Internal Rate of Return
(d)
Payback Period
(e)
Average Rate of Return
1st preferred
Project A, B, C, or D?
2nd preferred
3rd preferred
4th preferred
Part 2: Write a response in an initial post of at least 200 words discussing the usefulness of capital investment techniques (net present value, profitability index, internal rate of return, payback period, and average rate of return) in selecting the four alternative investment opportunities in part 1.
Guided Response: Review several of your peers’ posts. In a post of at least 100 words, respond to at least two of your peers’ posts in a substantive manner. Provide information that they may have missed or may not have considered about the strengths and weaknesses of the capital budgeting techniques including a comparison between techniques based on the time value of money versus those that are not. Do you agree with your peers’ findings? Why or why not?

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