Question
YZA Corporation has $1,400,000 available for investment in capital projects. Evaluate the following 6 projects and decide which should be accepted to stay within the
YZA Corporation has $1,400,000 available for investment in capital projects. Evaluate the following 6 projects and decide which should be accepted to stay within the budget and maximize NPV. The opportunity cost of capital is 11 percent.
Project | Investment ($thousands) | NPV ($thousands) | IRR (%) |
1 | 500 | 80 | 14.0 |
2 | 300 | 50 | 13.0 |
3 | 400 | 60 | 12.5 |
4 | 200 | 25 | 11.0 |
5 | 250 | 30 | 10.5 |
6 | 450 | 70 | 13.5 |
Requirements:
- Identify which projects to undertake.
- Calculate the total investment amount for the selected projects.
- Compute the total NPV of the selected projects.
- Analyze the significance of the opportunity cost of capital.
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Practical Management Science
Authors: Wayne L. Winston, Christian Albright
5th Edition
1305631540, 1305631544, 1305250907, 978-1305250901
