McEntyre Capital Investment Report
[WLOs: 1, 2, 3] [CLOs: 1, 2, 6]
Prior to beginning work on this assignment, review Chapter 14 in your course textbook,
Survey of Accounting
.
McEntyre Company has $80,000 in capital funds available for investment. The capital investment committee at McEntyre Company is currently considering two capital investment projects.
The estimated income from operations and net cash flows expected from each project are as follows:
|
Project A
|
Project B
|
|
Year
|
Income from Operations
|
Net Cash Flow
|
Income from Operations
|
Net Cash Flow
|
|
1
|
$ 8,000
|
$24,000
|
$ 14,000
|
$ 30,000
|
|
2
|
9,000
|
25,000
|
10,000
|
26,000
|
|
3
|
11,000
|
27,000
|
8,000
|
24,000
|
|
4
|
8,000
|
24,000
|
7,000
|
23,000
|
|
5
|
8,000
|
24,000
|
3,000
|
19,000
|
|
|
$44,000
|
$124,000
|
$42,000
|
$122,000
|
Each project requires an investment of $80,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 20% as the minimum average rate of return for capital investments.
Analyze the projects and prepare a report for the capital investment committee, advising it of the relative merits of each project.
In your paper,
· Explain the purpose of the report and describe the nature and importance of capital investment analysis.
· Analyze each long-term capital investment project based on the average rate of return.
· Compute the average rate of return for each project and show your work.
· Determine whether each project meets the minimum average rate of return required by the committee.
· Discuss the advantages and disadvantages of the average rate of return method.
· Rank the projects based on average rate of return.
· Analyze each project based on cash payback period.
· Determine the cash payback period for each project. Assume that net cash flows for both projects are uniform throughout the year.
· Discuss the advantages and disadvantages of the cash payback method.
· Rank the projects based on the cash payback period.
· Discuss at least three factors that could potentially complicate your capital investment analysis.
· Summarize your analysis and make a recommendation to the capital investment committee regarding which project the committee should fund.
The McEntyre Capital Investment Report final paper
· must be 3 to 4 double-spaced pages in length (not including title and references pages) and formatted according to
APA Style
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as outlined in the Writing Center’s
APA Formatting for Microsoft Word
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resource.
· must include a separate title page with the following in title case:
· title of final paper in bold font
· Space should appear between the title and the rest of the information on the title page.
· student’s name
· name of institution (The University of Arizona Global Campus)
· course name and number
· instructor’s name
· due date
· must utilize academic voice. Review the
Academic Voice
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resource for additional guidance.
· must include an introduction and conclusion paragraph.
· Your introduction paragraph needs to end with a clear thesis statement that indicates the purpose of your paper.
· For assistance on writing
Introductions & Conclusions
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and
Writing a Thesis Statement
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, refer to the Writing Center resources.
· must use APA level headings, found on the Writing Center’s
APA Style Elements
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page, for each one of the topics discussed in the research paper as shown:
· Introduction Level 1
· Average Rate of Return Analysis Level 1
· Cash Payback Period Analysis Level 1
· Potential Complicating Factors Analysis Level 1
· Summary and Recommendation Level 1
· must use at least four scholarly sources in addition to the course text.
· The
Scholarly, Peer-Reviewed, and Other Credible Sources
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table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source.
· To assist you in completing the research required for this assignment, review this
Quick and Easy Library Research
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tutorial, which introduces the University of Arizona Global Campus Library and the research process, and provides some library search tips.
· To assist you in completing the research for this assignment, review
Company Research in the UAGC Library
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tip sheet and
How to Use Library OneSearch
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video.
· must document any information used from sources in APA Style as outlined in the Writing Center’s
APA: Citing Within Your Paper
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guide.
· must include a separate references page that is formatted according to APA Style as outlined in the Writing Center. Review the
APA: Formatting Your References List
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resource in the Writing Center for specifications.
