=+b Briefly explain two reasons why you might regard net present value as being supe-

rior to internal rate of return for project appraisal.

Now assume that at Time 0 only £700,000 of capital is available for project invest-

ment. Calculate the wisest allocation of these funds to achieve the optimum return on the assumption that each of the projects is divisible (fractions may be under-

taken). What is the highest net present value achievable?