Illustration 1: In a capital rationing situation investment limit Rs. 25 lakhs), suggest the most desirable feasible combination on the basis of the following data (Indicate justification) (Rs. lakhs) Year Net cash flow NPV 15 B 10 4.5 7.5 3.6 6 3 In Project B and Care mutually exclusive. Determination of feasible combination in Capital Rotationing Situation (Investment Limit Rs. 25 lakhs) (Rs. lakhs) Combination Total outlay NPV A&B 25.00 10.50 A&C 22.50 9.60 A&D 21.00 9.00 B&D 16.00 7.50 C&D 13.50 6.60 Analysis : From the above analysis it is observed that projects A&B combination give highest NPV of Rs. 10.50 lakhs. Therefore 43 by undertaking projects A and D, the wealth maximation is possible. Illustration 2: The total available budget for a company is Rs. 20 crores and the total cost of the projects is Rs. 25 crores. The projects listed below have been ranked in order of profitability There is possibility of submitting X project where cost is assumed to be Rs. 12 crores and it has the Profitability Index of 140. Project Cost (Rs. Crores) Profitability index (P.V. of cash Inflow/PV of cash outflows) x 100 150 125 120 115 5 110 25 A B 6 5 Which projects, including X, should be acquired by the company