1. A firm must choose from six capital budgeting proposals outlined below. The firm is subject to capital rationing, has a capital budget of $1,000,000 and the firms cost of capital is 15 percent. Using the net present value approach to ranking projects, which projects should the firm accept?

Projects:	1	2	3	4	5	6
Initial Investment	$200,000	$400,000	$250,000	$200,000	$150,000	$400,000
IRR	14%	12%	10%	15%	12%	12%
NPV	$100,000	$20,000	$60,000	$(5,000)	$50,000	$150,000

1. 1, 3, 5, and 6
2. 1, 2, 3, 4, and 5
3. 2, 3, 4, and 5
4. 1, 3, 4, 5 and 6