You are presented with a group of eight potential projects, any of which your firm could invest in, were it considered that the firms owners would be better off by acceptance of the project(s). You are also informed that the firm uses a cost of capital of 10 per cent per annum in its evaluation of projects; and that there is a soft constraint of 1 million available for capital investment in the current period. You request further information on the various projects and receive the following table of data: Project Initial investment (000) NPV at 10% pa IRR % pa Life in years 1 100 40 22 2 2 250 60 20 2 3 600 200 15 20 4 200 100 25 10 5 600 300 17 40 6 150 60 15 10 7 50 30 60 1 8 250 150 20 15 Required: (a) Describe the nature of this capital budgeting problem; and outline how you would set about taking a decision on what projects to invest in. (30 marks) (b) With supporting workings, propose and justify a solution that serves the interests of shareholders. (30 marks) (c) Discuss the adequacy of your approach in parts a and b; and suggest what additional data would be needed to improve upon the decision-making.