The ABC Company plc is considering five projects

Project A Initial outlay 6,300 Profitability Index 1.10

Project B Initial outlay 4,300 Profitability Index 1.15

Project C Initial outlay 9,900 Profitability Index 1.60

Project D Initial outlay 7,700 Profitability Index 1.50

Project D Initial outlay 6,900 Profitability Index 1.05

Projects C and D are mutually exclusive and the firm has 18,000 available for investment. All projects can be undertaken only once and are divisible.

Part 1

Which projects should be undertaken to maximise NPV in the presence of the capital constraint?

A.Project E, Project B, Project A and part of Project C

B.Project C, Project B and part of Project A

C.Project B, Project E and part of Project C

D.Project B, Project E and part of Project D

Part 2

What is the maximum possible NPV that can be achieved in the presence of the capital constraint?(Round to two decimal places).