Grosvenor Industries has designated $1.2 million for capital investment expenditures throughout the upcoming year. Its cost of capital is 14 %. Any unused funds will earn the cost of capital rate. The given investment opportunities all along with their required investment and estimated net present values have been recognized:
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 given:
1) Rank the projects by using the profitability index. Considering the limit on funds available, which projects must be accepted?
2) By using the NPV, which projects must be accepted, considering the limit on funds available?