The table below lists the independent projects that your company is considering to invest:
|Project||Initial investment (USD)||NPV (USD)||IRR (%)|
The required return is 8.1 percent. If there is an investment budget ceiling of $1,000,000, what is the total net present value of investment opportunuties missed (the sum of NPVs of the feasible projects that your company couldn't invest) due to budget limit?
Select the Projects which gives higher NPV
|Option||Projects Selected||Capoital Invested||NPV||Ranking|
|A||G,F,D,A||$ 10,00,000.00||$ 2,44,633.00||1|
|B||G, F, E||$ 9,90,000.00||$ 1,68,956.00||3|
|C||G,F, B||$ 8,90,000.00||$ 1,65,455.00||4|
|D||D,E||$ 8,30,000.00||$ 1,26,932.00||6|
|E||D,B,A||$ 9,30,000.00||$ 1,75,562.00||2|
|F||E,B||$ 9,20,000.00||$ 1,52,016.00||5|
Now Project is selecting Projects G, F, D, A and Loosing Projects due to budget Limit are B,E
As C has -ve NPV, It will always rejected.
NPV of B& E is [ 48192+ 51693 ]
= $ 99,885
OPtion A is correct.
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