B. CAPITAL BUDGETING Situation: Assume that you are planning to invest for the expansion of your business. You consider the two projects: large expansion which costs PHP 1,100,000 and medium expansion...

Answer 6-10

Extracted text: B. CAPITAL BUDGETING Situation: Assume that you are planning to invest for the expansion of your business. You consider the two projects: large expansion which costs PHP 1,100,000 and medium expansion which costs PHP500,000. The discount rate is 8% annually. You are task to do the following. Also, you interpret your result (for problem solving). 1 -ncion 4. Calc 5. -sion 6. Calculate the Profitability Index for Medium Expansion 7. Calculate the Payback period for Large Expansion 8. Calculate the Payback period for Medium Expansion 9. Create an Evaluation Summary indicating the NPV, IRR, PI, and Payback period of all options. Please see the PDF lecture notes or lecture video for the guide. 10. Based on the NPV, IRR, PI, and Payback period of each project option, what is the best option for the expansion of your business? Discuss your answer. Project A Large Expansion PHP 1,100,000 Project B Medium Expansion Particulars Initial Investment Outlay PHP 500,000 Cash Inflows Year 1 PHP 250,000 PHP 100,000 Year 2 Year 3 PHP 300,000 PHP 120,000 PHP 150,000 PHP 170, 000 PHP 350,000 Year 4 PHP 400,000