CASE 5

Ms. Marielle Bragado is currently having a hard time reviewing the project proposals sent to her by her executive secretary. Projects A, B, C, D and E were all submitted together with the capital budgeting analysis results.

Secretary: Hi Maam! Here is the summary of the capital budgeting analysis done by our Finance Lead. The five projects were all presented and marked if accepted or rejected based on the capital budgeting technique used.

Ms. Marielle: This really causes me headache. Why is it that only Projects A and E are accepted if the profitability index and net present value index will be used in deciding? Projects B, C and D all have more than 1.0 indices as well but why?

Secretary: I also dont know maam, but he is saying something about resource allocation. I think that would give you a hint.

Ms. Marielle: I know, and assuming that all of these projects can be accepted, the company will be more than willing to invest in all these projects. I just dont know why the other projects were recommended to be rejected already.

Required: Assuming that you are the Finance Lead, what factor/s will cause you to accept/reject projects even if they are all deemed acceptable? Explain