[SOLVED] Your first assignment in your new position as assistant financial analyst at Caledonia Products is to evaluate two new capital budgeting proposals

[SOLVED] Your first assignment in your new position as assistant financial analyst at Caledonia Products is to evaluate two new capital budgeting proposals

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Your first assignment in your new position as assistant financial analyst at Caledonia Products is to evaluate two new capital budgeting proposals. Because this is your first assignment, you have been asked not only to provide a recommendation, but also to respond to a number of questions aimed at assessing your understanding of the capital budgeting process. This is a standard procedure for all new financial analyst at Caledonia, and it will serve to determine whether you are moved directly into the capital budgeting analysis department or are provided with remedial training. The memorandum you received outlining your assignment follows;

To: The New Financial Analysts

From: Mr. V Morrison, CEO, Caledonia Products

Re: Capital-Budgeting Analysis

Provided an evaluation of two proposed projects, both with 5 year expected lives and identical initial outlays of $110,000. Both of these projects involves additions to Caledonia’s highly successful Avalon product line, and as a result, the required rate of return on both projects has been established at 12 percent. The expected cash flow from each project is as follows;

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