Suppose in the capital budgeting model in Figure 14.40 that each investment requires $2000 during year 2 and only $5000 is available for investment during year 2.
a. Assuming that available money un-invested at the end of year 1 cannot be used during year 2, what combination of investments maximizes NPV?
b. Suppose that any un-invested money at the end of year 1 can be used for investment in year 2. Does your answer to part a change?