Question $1(14$ Marks$)$

A pharmaceutical company has R$1$ million allocated for the following capital projects:

Project Investment $($R$\text{'}000)$ NPV $($R$\text{'}000)$

$130066$

$2200-4$

$325043$

$410014$

$51007$

$635063$

$740048$

The opportunity cost of capital for each project is $11\%$

Required:

$1\mathrm{.}1.$ Which projects should the company accept to stay within the R$1$ million budget? $(7)$

$1\mathrm{.}2.$ What is the maximum net present value for the R$1$ million budget? $(2)$

$1\mathrm{.}3.$ How much does the budget limit cost the company in terms of market value? $(3)$

$1\mathrm{.}4.$ What is the cost of the capital rationing constraint? $(2)$