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Henry Lawson has a number of possible projects to invest in. He has been advised by his bank that he has a hard capital ration
Henry Lawson has a number of possible projects to invest in. He has been advised by his bank that he has a hard capital ration of $25,000. He has provided you with the following information: Year Project A Project B Project C Project D 0 $ (8,000.00) $ (15,000.00) $ (10,000.00) $ (14,000.00) $ 4,000.00 $ 6,000.00 $ 7,000.00 1 $ 11,000.00 $ $ 8,500.00 $ 8,000.00 2 5,000.00 $ 12,000.00 $ $ $ 11,000.00 16,000.00 3 5,000.00 $ 19,000.00 $ $ $ 12,000.00 4 8,000.00 9,000.00 $ 7,000.00 The discount rate is 12% Which combination of projects should they invest in based on profitability index (3 Marks)? Answer: Which single project should be invested in based on NPV (2 Marks)
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