Question
You have a $1 million capital budget and must make the decision about which investments your firm should undertake for the coming year. There are
You have a $1 million capital budget and must make the decision about which investments your firm should undertake for the coming year. There are three projects available and the cash flows of each project appear below. Assume a cost of capital of 12%. Which project or projects do you select?
| | Project 1 | Project 2 | Project 3 |
| Cash flow | | | |
| Year 0 | -$400,000 | -$500,000 | -$1,000,000 |
| Year 1 | 200,000 | 300,000 | 500,000 |
| Year 2 | 300,000 | 350,000 | 700,000 |
| Year 3 | 300,000 | 350,000 | 700,000 |
Step by Step Solution
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Project 1 Year Cash Flow PVF 12 NPV 0 400000 1 400000 1 200000 0893 178600 2 300000 0...
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Introduction to Corporate Finance What Companies Do
Authors: John Graham, Scott Smart
3rd edition
9781111532611, 1111222282, 1111532613, 978-1111222284
