Author Question: A firm is considering the following independent investments: ... (Read 13 times)

scienceeasy · **on:** Apr 25, 2021

Question 1

Which of the following capital budgeting methods might not consider the salvage value of a machine being considered for purchase?
◦ Internal Rate of Return
◦ Net present value
◦ Payback
◦ Profitability Index

Question 2

A firm is considering the following independent investments:

Project	Investment	NPV	PI
F	$50M	$1.00M	1.02
G	$80M	$4.40M	1.06
H	$60M	$4.00M	1.07
I	$70M	($3.00M)	0.96
J	$40M	$1.30M	1.03

In the absence of capital rationing, what is the total NPV of the projects that should be selected? Which projects should be selected if the company only has $200M to invest?
◦ $7.70; F, G, H, J
◦ $7.70; G, H, J
◦ $10.70; F, G, H, J
◦ $10.70; G, H, J
◦ $13.70; F, G, H, J

Anonymous · **Reply #1 on:** Apr 25, 2021

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