Military Jargon Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Project Name Bravo Tango Uniform Victor Investment $880,008 Investment $2,770,865 Investment $1,566,680 Investment $918,346 Year Income from Operations Net Cash Flows Income from Operations Net Cash Flows Income from Operations Net Cash Flows Income from Operations Net Cash Flows 1 $96,000 $240,000 $294,500 $950,000 $176,000 $400,000 $108,000 $380,000 2 96,500 240,000 294,775 950,000 176,000 400,000 108,000 380,000 3 97,000 240,000 295,050 950,000 176,000 400,000 108,000 380,000 4 97,500 240,000 295,325 950,000 176,000 400,000 108,000 380,000 5 98,000 240,000 295,600 950,000 176,000 400,000 108,000 380,000 Total $485,000 $1,200,000 $1,475,250 $4,750,000 $880,000 $2,000,000 $540,000 $1,900,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 The company's capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 20% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Required: 1. Compute the cash payback period for each of the four proposals. Assume that net cash flows are uniform throughout the year. Cash Payback Period Proposal Bravo 3 years 8 months Proposal Tango 2 years 11 months Proposal Uniform 3 years 11 months Proposal Victor 2 years 5 months 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place. Average Rate of Return Proposal Bravo % Proposal Tango 21.30 % Proposal Uniform % Proposal Victor %
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
Military Jargon Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows:
| Project Name |
Bravo | Tango | Uniform | Victor | ||||
| Investment | $880,008 | Investment | $2,770,865 | Investment | $1,566,680 | Investment | $918,346 | |
Year |
Income from Operations |
Net Cash Flows |
Income from Operations |
Net Cash Flows |
Income from Operations |
Net Cash Flows |
Income from Operations |
Net Cash Flows |
| 1 | $96,000 | $240,000 | $294,500 | $950,000 | $176,000 | $400,000 | $108,000 | $380,000 |
| 2 | 96,500 | 240,000 | 294,775 | 950,000 | 176,000 | 400,000 | 108,000 | 380,000 |
| 3 | 97,000 | 240,000 | 295,050 | 950,000 | 176,000 | 400,000 | 108,000 | 380,000 |
| 4 | 97,500 | 240,000 | 295,325 | 950,000 | 176,000 | 400,000 | 108,000 | 380,000 |
| 5 | 98,000 | 240,000 | 295,600 | 950,000 | 176,000 | 400,000 | 108,000 | 380,000 |
| Total | $485,000 | $1,200,000 | $1,475,250 | $4,750,000 | $880,000 | $2,000,000 | $540,000 | $1,900,000 |
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Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162
The company's capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average
Required:
1. Compute the cash payback period for each of the four proposals. Assume that net cash flows are uniform throughout the year.
| Cash Payback Period | |
| Proposal Bravo |
3 years 8 months
|
| Proposal Tango |
2 years 11 months
|
| Proposal Uniform |
3 years 11 months
|
| Proposal Victor |
2 years 5 months
|
2. Giving effect to straight-line
| Average Rate of Return | |
| Proposal Bravo | % |
| Proposal Tango | 21.30 % |
| Proposal Uniform | % |
| Proposal Victor | % |
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