Initial Investment Cash flow

Project A

$20

million

$8

million per year for four yearsProject B

$12

million

$4

million per year for five years Project C

$8

million

$4

million per year for four years Project D

$12

million

$6.0

million per year for three years An investor has a budget of

$20

million. He can invest in the projects shown above. If the cost of capital is

7%,

what investment or investments should he make?

A.

Project A

B.

Project B

C.

Project B and Project C

D.

Project C and Project D