- For this assignment, refer to the scenario located in “Problems – Series A” section 10-19A of Ch. 10, “Planning for Capital Investments” of Fundamental Managerial Accounting Concepts. This scenario puts you at task as a Senior Accountant for Donovan Enterprises to identify the preferred method and best investment opportunity for the company.
Read the scenario in the textbook and complete the activity below.
Use Excel®—showing all work and formulas—to compute the following:
******** Problem 10-19A This is the scenario BELOW******
Dwight Donovan, the president of the Donovan Enterprise, is considering 2 investment opportunities. Because of limited resources, he will be able to only invest in one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no savage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $400,000 and for Project B are $160,000. The annual expected cash inflows are $126,000 for Project A and $52,800 for Project B. Both investments are expected to provide cash flow benefits for the next 4 years. Donovan’s Enterprise desired rate of return is 8 percent.