Galaxy Satellite Co. is attempting to select the best group of independent projects competing for the firm's fixed capital budget of $10,000,000. Any unused portion of this budget will earn less than its 20 percent cost of capital. A summary of key data about the proposed projects follows. Project Initial investment IRR PV of inflow at 20% A 3,000,000 21% 3,050,000 B 9,000,000 25% 9,320,000 C 1,000,000 24% 1,060,000 D 7,000,000 23% 7,350,000 i) Use the NPV approach to select the best group of projects. ii) Use the IRR approach to select the best group of projects. iii) Which projects should the firm implement?
Galaxy Satellite Co. is attempting to select the best group of independent projects
competing for the firm's fixed capital budget of $10,000,000. Any unused portion of
this budget will earn less than its 20 percent cost of capital. A summary of key data
about the proposed projects follows.
Project Initial investment
A 3,000,000 21% 3,050,000
B 9,000,000 25% 9,320,000
C 1,000,000 24% 1,060,000
D 7,000,000 23% 7,350,000
i) Use the NPV approach to select the best group of projects.
ii) Use the IRR approach to select the best group of projects.
iii) Which projects should the firm implement?
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