Consider the following projects and assume an opportunity cost of capital of 12%. Cash Flows Project...

 

Transcribed Image Text:

Consider the following projects and assume an opportunity cost of capital of 12%. Cash Flows Project A B C Co C1 C₂ -£20,000 £45,000 £15,000 -£10,000 £15,000 £30,000 -£10,000 £15,000 £25,000 a. Calculate the Net Present Value (NPV) of each project. Which is to be preferred and why? (8 marks) b. If there is a capital constraint in place which limits spending to £10,000, which project or projects should be selected? Support your answer with calculations. Consider the following projects and assume an opportunity cost of capital of 12%. Cash Flows Project A B C Co C1 C₂ -£20,000 £45,000 £15,000 -£10,000 £15,000 £30,000 -£10,000 £15,000 £25,000 a. Calculate the Net Present Value (NPV) of each project. Which is to be preferred and why? (8 marks) b. If there is a capital constraint in place which limits spending to £10,000, which project or projects should be selected? Support your answer with calculations.

Answer rating: 100% (QA)

In the capital budgeting analysis Net Present Value refers to the discounting method to determine pr... View the full answer