Discount Rate = 10%

Capital Available = $0

If you could choose one or more of these projects and you have a hard budget constraint of $600, which projects would you choose? What is the total NPV achieved? How much of your budget was left unspent?

Project A B Expected Cash Flows (in $ millions) Initial Cost Year 1 Year 2 Year 3 Year 4 $300 $100 $275 $300 $200 $250 $400 $300 $200 $100 $350 $50 $200 $50 $200 $475 $75 $100 $125 $150 $200 $0 $0 $0 $500 $150 $50 $50 $50 $50 Year 5 NPV $50 $411.22 $0 $580.13 $50 $65.95 $175 ($19.16) $500 $451.97 $50 $39.54 D E F