FOR THIS DISUSSION YOU MUST PROVIDE DETAILED CALCULATIONS BY SHOWING ALL OF YOUR WORK…

(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

YOU MUST ANSWER ALL THREE QUESTIONS THOROUGHLY…PLEASE HEADLINE EACH AREA SO YOUR WORK IS SEPERATED AND UNDERSTANDABLE

**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**