Your company is evaluation 4 independent projects and is subject to capital rationing, detailed as...
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Your company is evaluation 4 independent projects and is subject to capital rationing, detailed as follows:
Project Initial Outlay IRR NPV
1 2 million 18% 2,500,000
2 1 million 15% 950,000
3 1 million 10% 600,000
4 3 million 9% 2,000,000
If you must select projects subject to a budget constraint of 3 million dollars, which set of projects should be accepted so as to maximize firm value?
| 1 and 2 | ||
| 1 only | ||
| 1, 2 and 3 | ||
| 1 and 4 | ||
| 2, 3 and 4 |
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