1. Board of Triton Investments is preparing the capital budget for the next financial year. Ten...

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1. Board of Triton Investments is preparing the capital budget for the next financial year. Ten capital projects are under consideration. A capital budget ceiling of $100M. Net present value (NPV) Profitability index (PI) Projects Project A Project B Project C Project D Project E Project F Project G Project H Project I Project J Total Initial cost $5,400,000 $7,200,000 $11,100,000 $20,500,000 $28,700,000 $25,900,000 $22,200,000 $6,100,000 $16,000,000 $15,700,000 $164,800,000 $10,400,000 $3,800,000 $5,700,000 $39.700,000 $34,000,000 $10,300,000 $18,200,000 S6,800,000 $18,100,000 $12,600,000 $159,600,000 2.93 1.53 1.51 2.50 2.18 1.40 1.82 2.11 2.13 1.80 If Triton could raise additional funds of $164.8M, all ten projects should be undertaken because all of them have positive NPV. This would increase shareholder value by $159.6M. So far as a budget ceiling is set, capital rationing occurs. Adding the cumulative cost column, decide which of the projects is (are) the best investment? 1. Board of Triton Investments is preparing the capital budget for the next financial year. Ten capital projects are under consideration. A capital budget ceiling of $100M. Net present value (NPV) Profitability index (PI) Projects Project A Project B Project C Project D Project E Project F Project G Project H Project I Project J Total Initial cost $5,400,000 $7,200,000 $11,100,000 $20,500,000 $28,700,000 $25,900,000 $22,200,000 $6,100,000 $16,000,000 $15,700,000 $164,800,000 $10,400,000 $3,800,000 $5,700,000 $39.700,000 $34,000,000 $10,300,000 $18,200,000 S6,800,000 $18,100,000 $12,600,000 $159,600,000 2.93 1.53 1.51 2.50 2.18 1.40 1.82 2.11 2.13 1.80 If Triton could raise additional funds of $164.8M, all ten projects should be undertaken because all of them have positive NPV. This would increase shareholder value by $159.6M. So far as a budget ceiling is set, capital rationing occurs. Adding the cumulative cost column, decide which of the projects is (are) the best investment?

Answer rating: 100% (QA)

Project Initial Cost 000 Cumulative cost 000 NPV 000 A 5400 5400 10400 B 7200 12600 3800 ... View the full answer