Ranking Capital Investment ProposalsManagers of the Emerald Bay Furniture Company have
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Ranking Capital Investment ProposalsManagers of the Emerald Bay Furniture Company have
Ranking Capital Investment Proposals
Managers of the Emerald Bay Furniture Company have gathered all of the capital investment proposals for the year, and they are ready to make their final selections. The following proposals and related rate-of-return amounts were received during the period:
| Amount of | Rate of Return | |
| Project | Investment | (Percentage) |
| AB | $ 450,000 | 19 |
| CD | 500,000 | 28 |
| EF | 654,000 | 12 |
| GH | 800,000 | 32 |
| IJ | 320,000 | 23 |
| KL | 240,000 | 18 |
| MN | 180,000 | 16 |
| OP | 400,000 | 26 |
| QR | 560,000 | 14 |
| ST | 1,200,000 | 22 |
| UV | 1,600,000 | 20 |
Assume that the company’s minimum rate of return is 15 percent, and that
$5,000,000 is available for capital investments during the year.
1. List the acceptable capital investment proposals in order of profitability.
2. Which proposals should be selected for this year?
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