Question
Dorothea MacKeller has a number of possible projects to invest in. She has been advised by her bank that she has a hard capital ration
Dorothea MacKeller has a number of possible projects to invest in. She has been advised by her bank that she has a hard capital ration of $20,000.
She has provided you with the following information:
Year
Project A
Project B
Project C
Project D
0
$ (5,000.00)
$ (8,000.00)
$ (10,000.00)
$(14,000.00)
1
$15,000.00
$6,000.00
$7,000.00
$11,000.00
2
$9,000.00
$5,000.00
$8,000.00
$12,000.00
3
$10,000.00
$11,000.00
$16,000.00
$19,000.00
4
$7,000.00
$12,000.00
$9,000.00
$7,000.00
The discount rate is 18%
Which combination of projects should they invest in based on profitability index (3 Marks)?
Answer:Answer
A Only
B Only
C only
D only
A&B
A&C
A&D
B&C
B&D
C&D
Which single project should be invested in based on NPV (2 Marks)?
Answer:Answer:Answer
A
B
C
D
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