a. Which of these projects would you accept? Why? b. What is the cost of the capital rationing constraint?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
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A small manufacturing firm, which has limited access to capital, has a capital rationing constraint of $ 150 million
and is faced with the following investment projects:
Project Initial Investment NPV
A.
$25
$10
B.
$30
$25
C
$40
$20
D.
$10
$10
$15
$10
S60
$20
G.
$20
$10
$25
$20
$35
S10
$15
$5
a. Which of these projects would you accept? Why?
b. What is the cost of the capital rationing constraint?
Transcribed Image Text:A small manufacturing firm, which has limited access to capital, has a capital rationing constraint of $ 150 million and is faced with the following investment projects: Project Initial Investment NPV A. $25 $10 B. $30 $25 C $40 $20 D. $10 $10 $15 $10 S60 $20 G. $20 $10 $25 $20 $35 S10 $15 $5 a. Which of these projects would you accept? Why? b. What is the cost of the capital rationing constraint?
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