Question

The table below lists the independent projects that your company is considering to invest:
Project   Initial investment (USD)   NPV (USD)   IRR (%)
A   150000   35803   12.94
B   510000   57040   12.41
C   230000   59392   13.08
D   450000   47742   12.44
E   370000   -34559   10.42
F   110000   32830   13.04
G   510000   143507   12.38
The required return is 11.0 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?
      
47742
      
95195
      
107134
      
104782
      
83545

Answer 1

Project	Initial Investment	NPV	NPV as % of Initial Investment [NPV/Initial Investment]	Ranking Based on % Return [Highest to Lowest]	Acceptance in the order of Ranks[upto total initial investment of 1000000]	Initial Investment	NPV
A	150000	35803	0.238686667	4	Accept	150000	35803
B	510000	57040	0.111843137	5
C	230000	59392	0.258226087	3	Accept	230000	59392
D	450000	47742	0.106093333	6
F	110000	32830	0.298454545	1	Accept	110000	32830
G	510000	143507	0.281386275	2	Accept	510000	143507
	Total NPV = Sum of NPVs	376314			Total	1000000	271532

E has Negative NPV and IRR is also Lower than Required Rate of Return. Therefore, E is Not a Feasible Project All.

Projects Lost due to Captial Constraint = Project B and D.

NPV lost = NPV of B + NPV of D = 57040 + 47742 = $104782