Your company is considering five projects:

Project

Initial outlay

Profitability index

A

$6000$

$1\mathrm{.}2$

B

$4000$

$1\mathrm{.}05$

C

$10000$

$1\mathrm{.}6$

D

$8000$

$1\mathrm{.}4$

E

$7000$

$1\mathrm{.}3$

Project C and D are mutually exclusive, and the company has R$20000$ available for investment. All projects can only be undertaken once and are divisible.

Required:

$7\mathrm{.}1.$ Which projects should be undertaken to maximise the NPV in the presence of capital constraints? What is the maximum NPV and initial outlay? $(10)$

$7\mathrm{.}2.$ If all projects can be undertaken, what is the level of NPV and initial outlay? $(5)$