=+The strategic planning group are keen on getting approval for the release of 42m to invest in all these projects. However, Cartma is a subsidiary of PQT and the holding company board have placed limits on the amount of funds available in any one year for major capital projects for each of its subsidiaries. They were prompted to do this by the poor response of debt holders to a recent capital raising exercise due to the already high borrowing levels. Also they feel a need to counteract the excessive enthu- siasm in subsidiary strategic planning groups which could lead to over-rapid expansion if all positive NPV projects are accepted, placing a strain on management talent. The limit that has been imposed on Cartma for the forthcoming year is 38m. The figures are:

Point in time 0 1 2 3 4 5 NPV (yearly intervals)
Em En Project A Cash flow -10 0 0 +20 0 0 Discounted cash flows -10 0 0 20/1.19ª
0 0 45 Project B Cash flow -15 5 5 5 5 5 Discounted cash flow -15 5 x Annuity factor for 5 years @ 10%
-15 + 5 x 3.7908 +3,95 Project C Cash flow -8 1 12 0 0 0 Discounted cash flows 1/1.1 12/(1.1)
0 0 0 +2.83 Project D Cash flow -5 2 2 2 2 2 Discounted cash flow -5 2 × Annuity factor for 5 years @ 10%
-5 +2 × 3.7908 +2.58 Project E Cash flow -4 0 0 3 3 3 Discounted cash flow (3 x Annuity factor for 3 years @ 10%)/(1.1)2 4 0 3 × 2.4868 (1.1)2 +2.17 Assume -
No inflation or tax.
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