D’Arcy (Builders) Ltd is considering three possible investment projects: A, B and C. The expected pattern of cash flows for each project is:

Project cash flows A B C

£000 £000 £000 Initial outlay (17) (20) (24)

1 year’s time 11 12 9 2 years’ time 5 7 9 3 years’ time 7 7 11 4 years’ time 6 6 13 The business has a cost of finance of 10 per cent and the capital expenditure budget for next year is £25 million.

Required:

Which investment project(s) should the business undertake assuming:

(a) each project is divisible; and

(b) each project is indivisible?