Question
Capital rationing: Consider the following projects, all with a required rate of return of 4%. Project Initial Outlay NPV PI IRR One $100 $20 1.20
Capital rationing: Consider the following projects, all with a required rate of return of 4%.
| Project | Initial Outlay | NPV | PI | IRR |
| One | $100 | $20 | 1.20 | 15% |
| Two | $300 | $30 | 1.10 | 10% |
| Three | $400 | $40 | 1.10 | 8% |
| Four | $500 | $45 | 1.09 | 5% |
| Five | $200 | $15 | 1.08 | 5% |
Which projects, if any, should be selected if the capital budget is:a) $100?, b) $300?, c) $500? d)$700?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
