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P 1 2 - 2 8 Capital rationing: NPV approach A firm with a 1 3 % cost of capital must select the optimal group

12 - 28

Capital rationing: NPV approach A firm with a

13 %

cost of capital must select the optimal group of projects from those shown in the

following table, given its capital budget of $

1

million.

Calculate the present value of cash inflows associated with each project.

Select the optimal group of projects, keeping in mind that unused funds are costly

.

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