FIN 325 Ch. 8 Practice Exercise

Your firm is evaluating 4 projects (A-D) with the following estimated CFs. The required return for all projects is 10%.

Year	CF(A)	CF(B)	CF(C)	CF(D)
0	-1000	-1200	-2000	-4000
1	200	0	350	500
2	400	300	750	1000
3	600	600	1150	2000
4	800	900	1500	3000
5	0	1000	0	0

1. Find the NPV, IRR, Payback Period, and Profitability Index for all 4 projects?

2. If the projects are mutually exclusive and only one can be selected, which should the firm choose?

3. A the firm is free to choose any combination of projects, but has a budget limit of $4000, which combo should they choose?