You
are in charge of one division of Bigfella Conglomerate Inc. Your
division is subject to capital rationing. Your division has four
indivisible projects available, detailed as follows:
Project Initial Outlay IRR NPV
1 2 million 18% 2,500,000
3 1 million 10% 600,000
2 1 million 15% 950,000
4 3 million 9% 2,000,000
If you must select projects subject to a budget constraint of 5 million dollars, which set of projects should be accepted so as to maximize firm value?
a.Projects 1, 2, and 3
b.Project 1 only
c.Projects 1 and 4
d.Projects 2, 3, and 4
Project Initial Outlay IRR NPV
1 2 million 18% 2,500,000
3 1 million 10% 600,000
2 1 million 15% 950,000
4 3 million 9% 2,000,000
If you must select projects subject to a budget constraint of 5 million dollars, which set of projects should be accepted so as to maximize firm value?
a.Projects 1, 2, and 3
b.Project 1 only
c.Projects 1 and 4
d.Projects 2, 3, and 4
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