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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?
A) Projects 1, 2 and 3
B) Project 1 only
C) Projects 1 and 4
D) Projects 2, 3 and 4
Answer
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