Hawk plc has the following projects in which it can invest: ...
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Finance
Hawk plc has the following projects in which it can invest:
| Project | Cash outflow at t=0, m | Present value at t=0 of cash inflows, m | NPV at t=0, m |
| A | 10 | 19 | 9 |
| B | 13 | 38 | 25 |
| C | 3.8 | 7.3 | 3.5 |
| D | 5.0 | 9.9 | 4.9 |
| E | 4.8 | 7.1 | 2.3 |
Hawk has no other investment opportunities. Projects C and D are mutually exclusive. The capital investment budget at t=0 is limited to 25 million. Hawk plc is committed to maximising the wealth of its shareholders.
How should Hawk utilise its capital investment budget if:
- all projects are divisible (can be scaled down)?
- all projects are indivisible?
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