Question

A company is considering the following investment opportunities (A, B, C).
Investment Initial Cost NPV @15% Expected Life IRR
A 5,500,000 340,000 10 yrs 20% 
B 3,000,000 300,000 10 yrs 30% 
C 2,000,000 200,000 10 yrs 40% 
a. If the company can raise large amounts of money at an annual cost of 15%, and if the investments are independent of one another, which should it undertake? 
b. If the company can raise large amounts of money at an annual cost of 15%, and if the investments are mutually exclusive, which should it undertake?
c. If the company has a fixed capital budget of $5.5 million, and if the investments are independent of one another, which should it undertake?



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  • CreatedJuly 26, 2013
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