A capital rationing problem is defined for you as follows: Three projects are to be evaluated at a MARR of 12.5% per year. No more than $3.0 million can be invested.

(a) Use a spreadsheet to select from the independent projects.

(b) If the life of project 3 can be increased from 5 to 10 years for the same $1 million investment, use Goal Seek to determine the NCF in year 1 for project 3 alone to have the same PW as the best bundle in part (a). All other estimates remain the same. With these new NCF and life estimates, what are the best projects forinvestment?

Estimated NCF, S per Year Gradient Years Ye after Year 1 Investment, Life, Project S M -0.9 2.1 6 250,000 485,000 5000 +5000 5 200,000 + 20%