A firm is considering the following independent projects. The total amount of capital available for investment is
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Question:
A firm is considering the following independent projects. The total amount of capital available for investment is $428.
| Project | Investment | Present value of future cash flows | NPV | P.I. |
| A | $156 | $212 | $56 | 1.36 |
| B | $199 | $227 | $28 | 1.14 |
| C | $160 | $248 | $88 | 1.55 |
| D | $191 | $236 | $45 | 1.24 |
| E | $105 | $153 | $48 | 1.46 |
Which projects should the firm accept?
Which of the following would be evidence that the market is not semi-strong-form efficient?
Select one:
a. Mechanical trading rules consistently outperform a "buy and hold" strategy.
b. Analysis of publicly available information enables mispriced securities to be consistently identified.
c. Investors with private information are able to buy or sell shares prior to the release of the information, and consistently achieve an abnormal return.
d. Both (a) and (b).
Expert Answer:
The firm should accept projects that provide the highest profitability index PI without exceeding the limit of total capital available 428 The profita... View the full answer
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