2. PhysisPharm plc. is a UK-based pharmaceutical company using natural ingredients in most of their medicine. The R&D department has created five prototypes of new medicine, and the management are analyzing them in terms of investment appraisal. Years/ cash flows in £000s Project 0 1 2 3 4 A -80 40 30 30 20 B -50 10 20 30 40 C -120 -30 80 90 100 -40 20 30 30 E -90 30 40 40 20 The company has only £150,000 of investment capital available in Year 0, meaning that capital rationing exists at Year 0, but not in Years 1 to 4. The appropriate discount rate used is 10%. Which projects should be selected to be undertaken: a) If projects are divisible. b) If projects are not divisible. D
2. PhysisPharm plc. is a UK-based pharmaceutical company using natural ingredients in most of their medicine. The R&D department has created five prototypes of new medicine, and the management are analyzing them in terms of investment appraisal. Years/ cash flows in £000s Project 0 1 2 3 4 A -80 40 30 30 20 B -50 10 20 30 40 C -120 -30 80 90 100 -40 20 30 30 E -90 30 40 40 20 The company has only £150,000 of investment capital available in Year 0, meaning that capital rationing exists at Year 0, but not in Years 1 to 4. The appropriate discount rate used is 10%. Which projects should be selected to be undertaken: a) If projects are divisible. b) If projects are not divisible. D
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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Transcribed Image Text:2. PhysisPharm plc. is a UK-based pharmaceutical company using natural
ingredients in most of their medicine. The R&D department has created five
prototypes of new medicine, and the management are analyzing them in terms
of investment appraisal.
Years/ cash flows in £000s
Project
0
1
2
3
4
A
-80
40
30
30
20
B
-50
10
20
30
40
C
-120
-30
80
90
100
-40
20
30
30
E
-90
30
40
40
20
The company has only £150,000 of investment capital available in Year 0,
meaning that capital rationing exists at Year 0, but not in Years 1 to 4. The
appropriate discount rate used is 10%.
Which projects should be selected to be undertaken:
a) If projects are divisible.
b) If projects are not divisible.
D
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