The Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four projects, each with a four year life and with the following cash flows are currently being considered: Year 0 1 2 3 4 Project RMk RMk RMk RMk RMk A -300 100 10 200 200 B -200 0 0 0 400 C -100 0 0 80 80 D -150 60 60 60 60 Distinguish between hard and soft capital rationing Assuming that the projects are divisible recommend to the Board, which projects should be accepted using the Net Present Value method and evaluate the total net present value that would be generated Discuss the impact on your analysis of each project being indivisible
The Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four projects, each with a four year life and with the following cash flows are currently being considered: Year 0 1 2 3 4 Project RMk RMk RMk RMk RMk A -300 100 10 200 200 B -200 0 0 0 400 C -100 0 0 80 80 D -150 60 60 60 60 Distinguish between hard and soft capital rationing Assuming that the projects are divisible recommend to the Board, which projects should be accepted using the Net Present Value method and evaluate the total net present value that would be generated Discuss the impact on your analysis of each project being indivisible
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four projects, each with a four year life and with the following cash flows are currently being considered:
|
Year |
0 |
1 |
2 |
3 |
4 |
|
Project |
RMk |
RMk |
RMk |
RMk |
RMk |
|
A |
-300 |
100 |
10 |
200 |
200 |
|
B |
-200 |
0 |
0 |
0 |
400 |
|
C |
-100 |
0 |
0 |
80 |
80 |
|
D |
-150 |
60 |
60 |
60 |
60 |
- Distinguish between hard and soft capital rationing
- Assuming that the projects are divisible recommend to the Board, which projects should be accepted using the
Net Present Value method and evaluate the total net present value that would be generated - Discuss the impact on your analysis of each project being indivisible
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