Solution-How can we maximize NPV, If we can't undertake a

How can we maximize NPV

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Reference no: EM133027820

Question - A company has nine projects under consideration. The NPV added by each project and the capital required by each project during the next two years is shown in the following table. (All numbers are in millions.) For example, project 1 will add $14 million in NPV and require expenditures of $12 million during year 1 and $3 million during year 2. $50 million is available for projects during year 1, and $20 million is available during year 2.

	NPV	Year 1 Expenditure	Year 2 Expenditure
Project 1	14	12	3
Project 2	17	54	7
Project 3	17	6	6
Project 4	15	6	2
Project 5	40	30	35
Project 6	12	6	6
Project 7	14	48	4
Project 8	10	36	3
Project 9	12	18	3

Required -

a) If we can undertake a fraction of a project, how can we maximize NPV?

b) If we can't undertake a fraction of a project but must undertake all of a project or none of a project, how can we maximize NPV?

Suppose that if project 4 is undertaken, project 5 must be undertaken. How can we maximize NPV?

Reference no: EM133027820

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How can we maximize NPV

Reference no: EM133027820

Reference no: EM133027820

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