Question

Suppose a company is considering the following 5 independent projects:

Project

A

B

C

D

E

initial Investment

$100

$300

$400

$500

-$200

NPV

$20

$30

$40

$45

$15

What projects, if any, should be selected if the capital budget is $500?​

Answer 1

A & C

Step-by-step explanation:

NPV, The Net Present Value of an investment is used in finance to calculate the profitability of a projected investment.

Since the capital budgeted for any investment is $500 ; hence the total initial investment the company can make should not exceed $500 ;

The company will be looking indulge in the most profitable investment, this we can judge Yung the NPV of each investment :

Therefore, the total NPV on investment A and Investment C is the highest while maintaining the $500 capital budget value.

Investment : ___ NPV

$100 - - - - - - - - > $20

$400 - - - - - - - - > 40

$500 - - - - - - - - > $60