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2–28 CAPITAL RATIONING: NPV APPROACH A firm with a 13% cost of capital must select the optimal group of projects from those shown in the following table, given its capital budget of $1 million. Calculate the present value of cash inflows associated with each project. Select the optimal group of projects, keeping in mind that unused funds are costly.

2–28 CAPITAL RATIONING: NPV APPROACH A firm with a 13% cost of capital must select the optimal group of projects from those shown in the following table, given its capital budget of $1 million. Calculate the present value of cash inflows associated with each project. Select the optimal group of projects, keeping in mind that unused funds are costly.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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P12–28 CAPITAL RATIONING: NPV APPROACH A firm with a 13% cost of capital must select the optimal group of projects from those shown in the following table, given its capital budget of $1 million.

  1. Calculate the present value of cash inflows associated with each project.
  2. Select the optimal group of projects, keeping in mind that unused funds are costly.

 

 

Project A B с D E F TI (5) G Initial investment -$300,000 - 200,000 -100,000 -900,000 -500,000 -100,000 -800,000 NPV at 13% cost of capital $ 84,000 10,000 25,000 90,000 70,000 50,000 160,000
Transcribed Image Text:Project A B с D E F TI (5) G Initial investment -$300,000 - 200,000 -100,000 -900,000 -500,000 -100,000 -800,000 NPV at 13% cost of capital $ 84,000 10,000 25,000 90,000 70,000 50,000 160,000
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