Company XYZ has five positive-NPV projects but does not have enough liquidity to take all of them.
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Question:
Company XYZ has five positive-NPV projects but does not have enough liquidity to take all of them. The investments and the corresponding NPVs are listed below (unit in £ million).
Project # | 1 | 2 | 3 | 4 | 5 |
Investment | 4.5 | 3 | 2.5 | 5.5 | 1 |
NPV | 65 | 60 | 28 | 150 | 20 |
In particular, XYZ only has £ 10 million available for investments. To maximize profit, which projects should be chosen?
a. 3, 4, and 5.
b. 1, 2, and 3.
c. 1 and 4.
d. 2, 4, and 5.
Expert Answer:
To maximize profit we should select the combination of projects that provides the highest tot... View the full answer
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