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1. BUS 630 Week 5 DQ 2
Ranking Investment
Alternatives - New
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2. BUS 630 Week 5 DQ 2 Ranking Investment Alternatives - New
(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.