Question
The ABC Company plc is considering five projects Project A Initial outlay 6,300 Profitability Index 1.10 Project B Initial outlay 4,300 Profitability Index 1.15 Project
The ABC Company plc is considering five projects
Project A Initial outlay 6,300 Profitability Index 1.10
Project B Initial outlay 4,300 Profitability Index 1.15
Project C Initial outlay 9,900 Profitability Index 1.60
Project D Initial outlay 7,700 Profitability Index 1.50
Project D Initial outlay 6,900 Profitability Index 1.05
Projects C and D are mutually exclusive and the firm has 18,000 available for investment. All projects can be undertaken only once and are divisible.
Part 1
Which projects should be undertaken to maximise NPV in the presence of the capital constraint?
A.Project E, Project B, Project A and part of Project C
B.Project C, Project B and part of Project A
C.Project B, Project E and part of Project C
D.Project B, Project E and part of Project D
Part 2
What is the maximum possible NPV that can be achieved in the presence of the capital constraint?(Round to two decimal places).
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