I need the whole steps for each one For a capital budget limit of $25,000, the s

Question

I need the whole steps for each one

For a capital budget limit of $25,000, the selected independent projects are: (3 Pts) 4. Initial Project Investment, Life, yearsNPV, $ 3,000 10,000 15,000 25,000 25,000 -40,000 6 6 8 4 12 8,540 12,325 1,000 15,350 a. P only b. Q only c. R only d. P and R Westco finances a truck today with monthly payments of $885.00. The APR is 3.75% compounded monthly and the term of the loan is 4 years, fully amortized. What will the loan balance be at the end of 3 years? (5 Pts) 5. a. $10,776.89 b. $10,236.14 c. $9,847.62 d. $10,407.39 None of the above

Explanation / Answer

(4)          Total capital budget limit is $25,000

Project Number

Initial Capital ($)

Life (years)

NPV (Million $)

Profitability Index (NPV/Initial Capital)

Prioritize from highest index value to lowest

P

-10000

6

3000

0.30

4

Q

-15000

6

8540

0.57

1

R

-25000

8

12350

0.49

2

S

-25000

4

1000

0.04

5

T

-40000

12

15350

0.38

3

Based on Profitability Index priority; only project Q should be selected, we cannot select the next project in priority list due to budget constraints. Initial capital required for project Q is $15,000, remaining $10,000 is not sufficient for Project R as it has initial capital requirement of $25,000.

Therefore correct answer is option b. Q Only

(5) Now we can use PV of an Annuity formula to find out the present value of the loan

PV = PMT * [1-(1+i) ^-n)]/i

Where PV =?

PMT = Monthly payment = $885

APR interest rate = 3.75% per year, compounded monthly, therefore i = 3.75%/12 = 0.3125% per month

n = N = number of payments = 4 years *12 months =48 month

Therefore,

PV = $885* [1- (1+0.003125)^-48]/0.003125

PV = $39,390.48

For the loan balance at the end of year 3, n= 12 (for remaining 12 months)

PV (at the end of year 3) = $885* [1- (1+0.003125)^-12]/0.003125

=$10,407.39

Therefore correct answer is option d. $10,407.39

Project Number

Initial Capital ($)

Life (years)

NPV (Million $)

Profitability Index (NPV/Initial Capital)

Prioritize from highest index value to lowest

P

-10000

6

3000

0.30

4

Q

-15000

6

8540

0.57

1

R

-25000

8

12350

0.49

2

S

-25000

4

1000

0.04

5

T

-40000

12

15350

0.38

3

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.