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