1. Which projects do you pick to maximize shareholder wealth? There is a budget constraint of $3M....
Question:
1. Which projects do you pick to maximize shareholder wealth? There is a budget constraint of $3M.
Under Capital Rationing | |||
Project | Cost | NPV | Include |
A | 237,005 | 84,334 | 0 |
B | 766,496 | 26,881 | 0 |
C | 304,049 | 23,162 | 0 |
D | 565,178 | 82,598 | 1 |
E | 108,990 | 20,590 | 1 |
F | 89,135 | 90,404 | 1 |
G | 795,664 | 18,163 | 0 |
H | 814,493 | 97,682 | 1 |
I | 480,321 | 52,063 | 1 |
J | 826,610 | 53,911 | 0 |
K | 734,830 | 56,323 | 0 |
L | 910,598 | 88,349 | 1 |
M | 978,621 | 69,352 | 0 |
Total | 2,968,715 | 431,686 | 6 |
Constraint | 3,000,000 |
2. In addition to the above budget constraint, assume that projects A and F are mutually exclusive, but one of them must be selected.
Use Solver function in excel and change Solver Constraints to account for this new information and find the new solution. Show screen shots of what solver constraints in Excel you choose to change.
3. Now, ignore the constraints Lets say that Project K is of great strategic importance to the survival of the firm. It must be accepted. Now, which projects should be accepted to maximize the overall shareholder wealth? Show screenshots from Excel's solver function to answer this question.
Foundations Of Financial Management
ISBN: 9781259265921
11th Canadian Edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta