Selection of a project

Question # 00005915 Posted By: ACCOUNTS_GURU Updated on: 12/29/2013 07:40 AM Due on: 12/31/2014
Subject Accounting Topic Accounting Tutorials:
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The following investment opportunities are available to an investment center manager:

Project A: initial investment of $800,000 with Annual Earnings of $90,000
Project B: initial investment of $100,000 with Annual Earnings of $20,000
Project C: initial investment of $300,000 with Annual Earnings of $25,000
Project A: initial investment of $400,000 with Annual Earnings of $60,000

a) If the investment manager is currently making a return on investment of 16 percent, which project(s) would the manager want to pursue?
b) If the cost of capital is 10 percent and the annual earnings approximate cash flows excluding finance charges, which project(s) should be chosen?
c) Suppose only one project can be chosen and the annual earnings approximate cash flows excluding finance charges, which project should be chosen?
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  1. Tutorial # 00005697 Posted By: ACCOUNTS_GURU Posted on: 12/29/2013 07:49 AM
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