10.) This problem tests your understanding of the chapter appendix. A company is considering the following investment opportunities

Investment

A

B

C

Initial Cost ($ millions)

5.5

3

2

Expected life

10 yrs

10 yrs

10 yrs

NPV @ 15%

$340,000

$300,000

$200,000

IRR

20%

30%

40%

A.) If the company can raise large amounts of money at an annual cost of 15 percent, and if the investments are independent of one an- other, which should it undertake?

B.) If the company can raise large amounts of money at an annual cost of 15 percent, and if the investments are mutually exclusive, which should it undertake?

C.) Considering only these three investments, if the company has a fixed capital budget of $5.5 million, and if the investments are in- dependent of one another, which should it undertake?