Question

Cowboy Corp. is about to expand its operations and they have several projects with various cash flows available in Excel upload file. Each project has an 8-year life and the firm has a cost of capital at 8%. The firm has $15,000 for the expansion and will invest in multiple projects with that capital constraint.

1. Calculate NPV for each project

2. Find the project combination that maximizes total NPV for Cowboy Corp. and calculate total capital spending

3. Find the optimum combination under following constraints; Project A and C can only be invested together and at least one out of Project E, F or G must be invested.

Cost of capital	8%
YEAR	0	1	2	3	4	5	6	7	8
Project A	-5000	1000	1250	1000	900	850	750	700	700
Project B	-3000	400	600	800	600	600	600	600	600
Project C	-4500	1200	1500	1200	1200	500	500	300	300
Project D	-2000	450	450	450	400	400	300	300	200
Project E	-7500	1350	1350	1350	1350	1350	1350	1350	1350
Project F	-8000	2000	2000	2000	1500	1500	1500	500	100
Project G	-6500	1400	1400	1200	1200	900	900	900	900

Answer 1

Solution.>

Since it is a 8-year project, the values of year 7 and year 8 is missing in the question. So i have solved it till the year 6. The answer would be different if we include the year 7 and 8, but the methodology will remain the same. I have solved this question in Excel. The formula used are written along with the values. If you still have any doubt, kindly ask in the comment section.

Note: Give it a thumbs up if it helps! Thanks in advance!