Question
Consider Projects 1, 2 and 3 with the following cash flows: Project CF at t = 0 ($) CF at t = 1 ($) CF
Consider Projects 1, 2 and 3 with the following cash flows:
Project | CF at t = 0 ($) | CF at t = 1 ($) | CF at t = 2 ($) | CF at t = 3 ($) |
1 | -3,600 | 2,000 | 2,200 | 2,200 |
2 | -16,000 | 8,000 | 8,000 | 10,000 |
3 | -1,800 | 1,000 | 1,000 | 1,000 |
Assume a required rate of return of 11% for all projects. A. Which project has the highest net present value (NPV)? B. Which project has the highest profitability index (PI)? C. Which project(s) should be undertaken if the company can raise an unlimited amount of funds to pay for its investment projects? You should explain why. D. Which project should be undertaken first if the company has a limited funding? You should explain why. E. Which project(s) should be undertaken if the firm has $4,000? F. Which project(s) should be undertaken if the firm has $6,000? G. Which project(s) should be undertaken if the firm has $22,000?
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