Explain basril plc, Financial Management

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BASRIL PLC

(a)

(i) Analysis of projects assume they are divisible.

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Project 2 NPV at 12% = (140800 × 3·605) - 450000 = $57584

Project 2 profitability index = 507584/450000 = 1·13

The optimum investment schedule engages investment in projects 3 and 2

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(ii) If the projects are supposed to be indivisible the total NPV of combinations of projects must be considered.

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The most favourable combination is now projects 1 and 3.


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