You are analyzing projects for a firm with a capital budget of $ 150 million. The table below summarizes the projects that are available to the firm and the net present values of these projects. Project Investment needed Net Present Value A $ 35 million $ 5 million B $ 15 million $ 3 million C $ 35 million $ 10 million D $ 25 million $ 8 million E $ 45 million $ 15 million F $ 10 million $ 5 million G $ 15 million $ 5 million H $ 20 million $ 7 million Which projects would you accept, given the capital rationing constraint? Assume that the constraints is internally imposed (by the firm’s management), can you estimate the effect of this constraint on firm value?
You are analyzing projects for a firm with a capital budget of $ 150 million. The table below summarizes the projects that are available to the firm and the net present values of these projects. Project Investment needed Net Present Value A $ 35 million $ 5 million B $ 15 million $ 3 million C $ 35 million $ 10 million D $ 25 million $ 8 million E $ 45 million $ 15 million F $ 10 million $ 5 million G $ 15 million $ 5 million H $ 20 million $ 7 million Which projects would you accept, given the capital rationing constraint? Assume that the constraints is internally imposed (by the firm’s management), can you estimate the effect of this constraint on firm value?
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
Problem 1PS
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You are analyzing projects for a firm with a capital budget of $ 150 million. The table below summarizes the projects that are available to the firm and the net present values of these projects.
Project Investment needed
A $ 35 million $ 5 million
B $ 15 million $ 3 million
C $ 35 million $ 10 million
D $ 25 million $ 8 million
E $ 45 million $ 15 million
F $ 10 million $ 5 million
G $ 15 million $ 5 million
H $ 20 million $ 7 million
- Which projects would you accept, given the capital rationing constraint?
- Assume that the constraints is internally imposed (by the firm’s management), can you estimate the effect of this constraint on firm value?
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