AS. (Capital rationing) Consider the following capital budgeting projects: PROFITABILITY INDEX PROJECT OUTLAY $150 300 200...

  

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AS. (Capital rationing) Consider the following capital budgeting projects: PROFITABILITY INDEX PROJECT OUTLAY $150 300 200 A B C NPV $ 60 105 60 PV $210 405 260 1.40 1.35 1.30 RANK (1= HIGHEST PI 123 2 3 a. With no limit on capital outlays, which projects should be accepted? What is the total outlay and the total NPV? b. Assume the capital budget is limited to $450. Which projects should be accepted? What is the total outlay and the total NPV? c. Assume the capital budget is limited to $400. Which projects should be accepted? What is the total outlay and the total NPV? AS. (Capital rationing) Consider the following capital budgeting projects: PROFITABILITY INDEX PROJECT OUTLAY $150 300 200 A B C NPV $ 60 105 60 PV $210 405 260 1.40 1.35 1.30 RANK (1= HIGHEST PI 123 2 3 a. With no limit on capital outlays, which projects should be accepted? What is the total outlay and the total NPV? b. Assume the capital budget is limited to $450. Which projects should be accepted? What is the total outlay and the total NPV? c. Assume the capital budget is limited to $400. Which projects should be accepted? What is the total outlay and the total NPV?

Answer rating: 100% (QA)

a Project A B and C all should be accepted because each projcet has positive NPV Apart from this we ... View the full answer