Assignment 1

T&M Ltd is considering three possible investment projects: A, B and C. The expected pattern of cash flows for each project is:

	Project Cash Flows
	A( 000)	B( 000)	C(C 000)
Initial outlay	(17)	(20)	(24)
1 years time	11	12	9
2 years time	5	7	9
3 years time	7	7	11
4 years time	6	6	13

The business has a cost of finance of 10 per cent and the capital expenditure budget for next year is 25 million

Required:

Which investment project(s) should the business undertake assuming:

(a) each project is divisible; and

(b) each project is indivisible?