Question
Oscorp currently has a chemical production facility, and it is cost-prohibitive to expand this production facility. Oscorp is deciding among the following contracts. Let us
Oscorp currently has a chemical production facility, and it is cost-prohibitive to expand this production facility. Oscorp is deciding among the following contracts. Let us assume the company only has $5 million for investment purposes.
| Project | Contract NPV | Contract IRR | Use of Production Facility |
| A | $100 Million | 13.47% | $3 Million |
| B | $90 Million | 12.17% | $2.75 Million |
| C | $60 Million | 9.18% | $1.25 Million |
| D | $50 Million | 13.85% | $5 Million |
| E | $45 Million | 11.11% | $2.5 Million |
| F | $90 Million | 10.95% | $1.25 Million |
Which projects or project should Oscorp accept?
| Projects A & F | ||
| Project C, E & F | ||
| Projects A & C | ||
| Projects A & D |
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Introduction To Derivatives And Risk Management
Authors: Robert Brooks, Don M Chance, Roberts Brooks
8th Edition
0324601212, 9780324601213
