4. Use the following information for parts a, b, and c below. For all 3 cases, the marginal cost of capital is 10%. These questions require short, to-the-point answers. I am interested in seeing if you know the most appropriate criterion to look for in each case. Also, make sure you answer all questions in each section.

Payback NPV NPV NPV

Project IRR (years) at 0% at 10% at 15%

A 17% 5 $10,000 $1,250 $290

B 21% 4 9,700 1,100 305

C 18% 4 9,300 1,125 315

c. Assume again that the 3 projects are independent projects, but the firm now faces severe capital rationing and can choose only one project. Which project should they select? Which criterion is appropriate in this case? Will there be an opportunity cost to the stockholders in this case? If so, how much? (4 pts)