1. Pepsico has the following projects in which it can invest:

Project	Cash outflow at t=0, m	Present value at t=0 of cash inflows, m	NPV at t=0, m
K	2	5.5	3.5
L	2.5	7.1	4.6
M	2.5	3.8	1.3
N	5.1	10	4.9
O	6.9	21	14.1

Pepsico has no other investment opportunities. Projects K and L are mutually exclusive. The capital investment budget at t=0 is limited to 12.5 million. Pepsico is committed to maximising the wealth of its shareholders.

How should Pepsico utilise its capital investment budget if:

a) all projects are divisible (can be scaled down)

b) all projects are indivisible?