(Capital rationing) Following are the capital projects being considered by the management of Hollywood Productions: Assume that...
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(Capital rationing) Following are the capital projects being considered by the management of Hollywood Productions:
Assume that all projects have no salvage value and that the firm uses a discount rate of 10 percent. Company management has decided that only $50,000,000 can be spent in the current year for capital projects.
a. Determine the net present value, profitability index, and internal rate of re¬ turn for each of the seven projects.
b. Rank the seven projects according to each method used in part a.
c. Indicate how you would suggest to the management of Hollywood Produc¬ tions that the money be spent. What would be the total net present value of your selected investments?
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