Capital rationing--NPV approach

A firm with a 13.7% cost of capital must select the optimal group of projects from those shown in the following table, given its capital budget of $1.00 million.

		NPV at 13.7%
Project	Initial Investment	Cost of capital
A	$200,000	$82,000
B	400,000	14,000
C	200,000	20,000
D	900,000	81,000
E	400,000	71,000
F	100,000	50,000
G	700,000	155,000

Calculate the present value of cash inflows associated with each project.

The present value of cash inflows for project A is $

. (Round to the nearest dollar.)

The present value of cash inflows for project B is $

. (Round to the nearest dollar.)

The present value of cash inflows for project C is $

. (Round to the nearest dollar.)

The present value of cash inflows for project D is $

. (Round to the nearest dollar.)

The present value of cash inflows for project E is $

. (Round to the nearest dollar.)

The present value of cash inflows for project F is $

. (Round to the nearest dollar.)

The present value of cash inflows for project G is $

. (Round to the nearest dollar.)

b. Consider the following options:

Option 1: Select projects A, B and E.

Option 2: Select projects D and C.

Option 3: Select projects A, C, E and F.

Option 4: Select projects C, F and G.

From the options above, the option that consists of the optimal group of projects (keeping in mind that unused funds are costly) is option

(enter '1', '2', '3', or '4').