| Course | AC505 Advanced Managerial/Cost Accounting |
|---|---|
| Unit | Unit 9 |
| Paper type | Capital investment analysis |
| Length | About 760 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Accounting |
| Updated | October 2026 |
Free sample paper for AC505 Unit 9
Three Projects, $3 Million and a Fragile First Place: A Unit 9 Capital Investment Analysis
[Student Name]
Purdue University Global
AC505: Advanced Managerial/Cost Accounting
Unit 9 Capital Investment Analysis
[Instructor Name]
[Date]
Harrow Creek Nut Company, its projects and every figure are composite; cash flows are after tax and simplified; the textbooks and article cited are real.
Memorandum
To: Chief Financial Officer From: Cost Analyst Date: April 14, 2027 Re: Capital allocation for the coming year
Fund the second roaster line, but only after testing its volume forecast, because its lead over the alternative portfolio is narrow.
The Projects
The optical sorter costs $1,200,000 and returns $330,000 a year for seven years by catching shell fragments and rejected kernels the current belt misses. The second roaster line costs $2,800,000 and returns $560,000 a year for ten years, plus $200,000 of salvage, by relieving the fall capacity shortage. Heat recovery costs $900,000 and saves $190,000 a year for ten years in natural gas.
The Measures at 9 Percent
The sorter has a net present value of $460,874, an internal rate of return of 19.68 percent, a profitability index of 1.384 and a payback of 3.6 years. The roaster has $878,370, 15.55 percent, 1.314 and 5.0 years. Heat recovery has $319,355, 16.54 percent, 1.355 and 4.7 years.
Each measure ranks the projects differently. The roaster has the highest net present value but the lowest internal rate of return and profitability index. The sorter pays back fastest. Net present value is the right primary measure because it shows the dollars each project adds to the company's value at its cost of capital, while the other measures favor small or short projects regardless of their total contribution (Datar & Rajan, 2021).
The Budget Constraint
The budget is $3,000,000, and projects cannot be split. The roaster costs $2,800,000, so choosing it leaves no room for either other project. The alternative is to fund the sorter and heat recovery together, $2,100,000, with a combined net present value of $780,229. The roaster's net present value is $98,141 higher.
The roaster wins on net present value, but its lead of $98,141 is equivalent to only $15,292 a year over ten years, so a forecast that is 2.7 percent too optimistic would make the smaller pair the better use of the money.
Sensitivity
Two tests show how fragile the lead is. If the roaster's annual cash flow falls from $560,000 to $544,708, the two options tie. And because the roaster's cash flows are spread over ten years, it is more sensitive to the discount rate: at 10 percent the roaster still leads, $718,066 to $674,046, but at 11 percent the pair leads, $573,979 to $568,407. The roaster's forecast depends on filling fall orders the company now turns away, which the capacity analysis put at 400 roaster hours a year. If those orders do not grow, much of the second line's capacity would sit idle in the slow months.
Sensitivity tests of this kind are the simplest guard against overconfident forecasts (Hilton & Platt, 2020). The sorter and heat recovery are lower-risk. The sorter's return comes from fewer customer complaints and less waste, measured in the plant today; heat recovery's from gas prices, which could rise or fall.
Non-Financial Factors
The projects also differ in ways the cash flows do not show. The sorter improves food safety directly: shell fragments are the most common source of customer complaints, and a single recall would cost far more than the sorter's price. Heat recovery reduces the plant's natural gas use by about a fifth, which matters to two grocery customers that now ask suppliers for emissions data. The roaster line adds capacity but also adds a second shift's worth of supervision, maintenance and food safety oversight, which the plant has struggled to staff. None of these factors is large enough on its own to overturn the net present value ranking, but together they argue for treating the roaster's narrow lead with caution and for considering the sorter first if any doubt remains about the fall forecast.
Recommendation
Fund the roaster, subject to two conditions. First, the sales team should confirm at least 70 percent of the forecast fall volume through signed or renewed customer programs before the order is placed. Second, if the confirmation falls short, fund the sorter and heat recovery instead and revisit the roaster next year. Surveys of practice show that most firms rely on discounted measures such as present value and internal return, yet add with sensitivity checks of exactly this kind (Graham & Harvey, 2001).
References
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243. https://doi.org/10.1016/S0304-405X(01)00044-7
Hilton, R. W., & Platt, D. E. (2020). Managerial accounting: Creating value in a dynamic business environment (12th ed.). McGraw Hill.
What the AC505 Unit 9 assignment asks for
Unit 9 of AC505 asks you to evaluate capital projects and recommend an allocation. Describe each project's cost, cash flows, life and salvage. Work out each project's discounted value, its internal return, its index of value per dollar invested and its payback period, and explain why the measures rank projects differently and which should lead. Apply the budget constraint by comparing feasible combinations of whole projects. Then test the recommendation with sensitivity analysis: find the change in a key input that would reverse the ranking and judge its likelihood. Discuss non-financial factors such as safety and customer requirements. Recommend an allocation with conditions tied to the main risk. Write as a memo to the decision-maker. Support the method with two cost texts and the Graham and Harvey survey, in APA 7.
How this AC505 Unit 9 example is built
The sample memo opens with a conditional recommendation. Project descriptions give the sorter at $1,200,000 for seven years, the roaster at $2,800,000 for ten years plus salvage and heat recovery at $900,000 for ten years. Measures at 9 percent show the roaster first on net present value but last on internal rate of return and profitability index. The budget section compares the roaster alone with the sorter and heat recovery together, a $98,141 difference. The highlighted sentence shows the lead equals $15,292 a year. Sensitivity finds a tie at $544,708 of annual cash flow and a reversal at 11 percent. Non-financial factors and a 70 percent volume confirmation condition close the memo.
Where the points sit in the AC505 Unit 9 rubric
Capital analyses in AC505 earn points for correct computation and sound use of the measures. Graders recompute all four measures for every project and expect an explanation of why rankings conflict and why net present value leads. The rubric rewards handling the budget constraint by comparing feasible combinations rather than ranking projects one by one. Sensitivity analysis that identifies the decisive input and its break-even value earns significant credit. Non-financial factors should be specific. Recommendations with conditions tied to the main risk show judgment. Memos that rank by internal rate of return alone or ignore the budget rarely pass. Reference each source in APA 7.
AC505 Unit 9 help from the desk
Common Unit 9 problems include ranking projects by internal rate of return or payback without explaining why net present value differs. The budget is applied by choosing the top-ranked project and stopping, without comparing combinations. Salvage value is omitted. Sensitivity analysis changes every input by ten percent instead of finding the one that decides the ranking. Non-financial factors, such as food safety, are ignored. The recommendation is unconditional despite a narrow margin. If your section's projects have different lives or the case includes taxes and depreciation, a writer can build the cash flows, measures and sensitivity from your data.
Get an AC505 Unit 9 example written to your instructions
Capital problems turn on cash flows and limits, so list the projects your Unit 9 case describes, each one's flows, the discount rate and any budget cap, and attach the rubric. Every measure the instructions require is computed, feasible bundles compared and the deciding assumption pushed to break-even in 24-48h, and the first request carries no charge. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC505 Unit 9 questions, answered
Why do NPV and IRR rank projects differently?
Mostly because of scale and timing. Internal rate of return measures percentage return, so a small project with a high rate can outrank a large one that adds more total value. Net present value measures dollars added at the required return. When projects are mutually exclusive or capital is limited, the analysis should explain the conflict and usually favors the measure that matches the firm's real constraint.
How should a capital limit be handled?
List the combinations of projects that fit within the budget and compare their total net present values. The profitability index helps rank divisible projects, but when projects are all or nothing, a high index can mislead, as it does here. Stating the feasible bundles explicitly shows the grader the limit was respected rather than noted and ignored.
Which assumption should the sensitivity analysis test?
The one that decides the ranking. Find the input whose change would reverse the recommendation, compute the value at which the alternatives tie, and judge how likely that value is. Moving every input by the same percentage produces tables but little insight. A single break-even figure, tied to evidence about the underlying assumption, is what usually earns the analysis marks.
Where can I find a free AC505 Unit 9 sample paper?
This page holds a full AC505 Unit 9 capital investment analysis for three projects at Harrow Creek Nut Company with four measures, a budget comparison, sensitivity tests and APA 7 references.
How small a change reverses the ranking?
A fall of $15,292 a year in the roaster's cash flow, about 2.7 percent, makes it tie with the sorter and heat recovery together. A discount rate of 11 percent also puts the pair ahead.