Accounting Question

Prior to beginning work on this assignment, review Chapter

1 4

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:

Income from OperationsNet Cash Flow

1

4,000

0,000

2

,000

3

8,000

48,00024,0007,000

58,00024,0003,000

Project A	Project B
Year		Income from Operations		Net Cash Flow
$			8,000	$	2	$ 14,000	$	3
9,000	2	5	10,000	26,000
11,000	2	7,000			24,000
2	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.
• must include a separate title page with the following in title case:title of final paper in bold fontSpace should appear between the title and the rest of the information on the title page.student’s namename of institution (The University of Arizona Global Campus)course name and numberinstructor’s namedue date
• must utilize academic voice. Review the Academic Voice.
• 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
• must use APA level headings, found on the Writing Center’s APA Style ElementsIntroduction Level 1 Average Rate of Return Analysis Level 1Cash Payback Period Analysis Level 1Potential Complicating Factors Analysis Level 1Summary and Recommendation Level 1
• must use at least four scholarly sources in addition to the course text.
• must document any information used from sources in APA Style as outlined in the Writing Center’s APA: Citing Within Your Paper

must include a separate references page that is formatted according to APA Style as outlined in the Writing Center.