You are in charge of one division of Yeti Surplus Inc. Your division is subject to capital
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Question:
You are in charge of one division of Yeti Surplus Inc. Your division is subject to capital rationing. Your division has 4 indivisible projects available, detailed as follows:
Project | Initial Outlay | IRR | NPV |
1 | 2 million | 18% | 2,500,000 |
2 | 1 million | 15% | 950,000 |
3 | 1 million | 10% | 600,000 |
4 | 3 million | 9% | 2,000,000 |
If you must select projects subject to a budget constraint of 5 million dollars, which set of projects should be accepted so as to maximize firm value?
Expert Answer:
Solution NPV is the better option in the evaluation of capital rationing Here the budget is ... View the full answer
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