Unicorn Engineering Ltd is considering three possible investment projects: X, Y and Z. The expected pattern of

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Unicorn Engineering Ltd is considering three possible investment projects: X, Y and Z. The expected pattern of cash flows for each project is as follows:

Initial outlay 1 year's time 2 years' time 3 years' time 4 years' time Project cash flows X Y Z m m (8)  5 2

The business has a cost of capital of 12 percent and the investment budget for the year that has just begun is restricted to £12 million. Each project is divisible (that is, it is possible to undertake part of a project if required).

Which investment project(s) should the business undertake?

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