Optimization of Capital Budgets University Hospital has four capital projects under consideration with the following investments and...

70.2K

Verified Solution

Question

Finance

Optimization of Capital Budgets
University Hospital has four capital projects underconsideration with the following investments and projected cashflows. What is their optimal capital budget allocation if theircorporate cost of capital is 12%?
Year 0 1 2 3 4 5
Project
A        (600,000)                                 50,000                    90,000         150,000         200,000         250,000
B        (400,000)                                 80,000                  100,000         100,000         100,000         100,000
C        (700,000)                              100,000                  220,000         250,000         250,000         250,000
D        (350,000)                                 90,000                  120,000         150,000         150,000         150,000
Optimal Budget??

Answer & Explanation Solved by verified expert

3.7 Ratings (669 Votes)

IRR is rate of return from Project Select the project in themanner in which these gives higher Rate of ReturnIRR of Project AIRR Rate at which least ve NPV NPV at that rate See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Optimization of Capital BudgetsUniversity Hospital has four capital projects underconsideration with the following investments and projected cashflows. What is their optimal capital budget allocation if theircorporate cost of capital is 12%?Year012345ProjectA (600,000) 50,000 90,000 150,000 200,000 250,000B (400,000) 80,000 100,000 100,000 100,000 100,000C (700,000) 100,000 220,000 250,000 250,000 250,000D (350,000) 90,000 120,000 150,000 150,000 150,000Optimal Budget??

	Year	0	1	2	3	4	5
Project
A		(600,000)	50,000	90,000	150,000	200,000	250,000
B		(400,000)	80,000	100,000	100,000	100,000	100,000
C		(700,000)	100,000	220,000	250,000	250,000	250,000
D		(350,000)	90,000	120,000	150,000	150,000	150,000