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Capital rationing decision for a service company involving four proposals Clearcast Communications Inc, is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated Operating income, and net cash flow for each proposal are as follows: The company's capital rationing policy requires a maximum cash payback period of 3 years. In addition, a minimum average rate of return of 12% 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. 2. Giving effect to straight-line depreclation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. If required, round your answers to one decimal place. 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the calculated amounts in the first two columns on the left and indicate which proposals should be accepted for further analysis and which should be rejected. If required, round your answers to one decimal place. 4. For the proposals accepted for further analysis in part (3), compute the net present value, Use a rate of 12% and the present value of $1 table above, Round to the nearest dollar. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). Rank 1st Ronk 2nd 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). Rank 1st Rank 2nd 8. The analysis indicates that although Proposal has the larger net present value, it is not as attractive as Proposal in terms of the amount of present volue per dollar invested. Proposol requires the larger investment. Thus, management shouid use investment resources for Proposal before investing in Proposal , absent any other qualitative considerations that may impoct the decision. Capital rationing decision for a service company involving four proposals Clearcast Communications Inc, is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated Operating income, and net cash flow for each proposal are as follows: The company's capital rationing policy requires a maximum cash payback period of 3 years. In addition, a minimum average rate of return of 12% 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. 2. Giving effect to straight-line depreclation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. If required, round your answers to one decimal place. 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the calculated amounts in the first two columns on the left and indicate which proposals should be accepted for further analysis and which should be rejected. If required, round your answers to one decimal place. 4. For the proposals accepted for further analysis in part (3), compute the net present value, Use a rate of 12% and the present value of $1 table above, Round to the nearest dollar. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). Rank 1st Ronk 2nd 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). Rank 1st Rank 2nd 8. The analysis indicates that although Proposal has the larger net present value, it is not as attractive as Proposal in terms of the amount of present volue per dollar invested. Proposol requires the larger investment. Thus, management shouid use investment resources for Proposal before investing in Proposal , absent any other qualitative considerations that may impoct the decision

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