disc question

(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

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