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Can someone help with this exercise? Terra Products has the following independent investments under examination: Terra Products' opportunity cost of capital is 14 percent. Ordinarily
Can someone help with this exercise?
Terra Products has the following independent investments under examination: Terra Products' opportunity cost of capital is 14 percent. Ordinarily you would want to adjust NPV for the project life but ignore that here. a. In the absence of capital rationing, which projects should be selected? What is the size (in total dollars) of the capital budget? The total NPV of all of the projects selected? b. Now suppose that a limit of $250,000 (maximum)is placed on new capital projects. Which projects should be selected? c. What is the total NPV determined in (b)? What is the loss to Terra Products due to the capital rationing constraintStep by Step Solution
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