What is the opportunity cost of the unused funds

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Reference no: EM131338217

Imperial Systems has $1 million available for capital investments during the current year. A list of possible investment projects, together with their net investments and net present values, is provided in the following table:

Project	Net Investment	Net Present Value
1	$200,000	$20,000
2	500,000	41,000
3	275,000	60,000
4	150,000	5,000
5	250,000	20,000
6	100,000	4,000
7	275,000	22,000
8	200,000	-18,000

a. Rank the various investment projects in terms of their profitability indexes (computed to three decimal places).

b. In the order of decreasing profitability index values and considering the capital constraints, which projects should be adopted? Are all capital funds expended?

c. Is there another combination that produces a higher aggregate net present value than the one developed in part b?

d. If less than the entire amount of available funds is invested, what is the opportunity cost of the unused funds?

Reference no: EM131338217

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