A firm has a budget constraint of $40 million to invest in new projects.Given the following information on four independent projects,which projects should the firm undertake?

Question

Quizplus · Accepted Answer

Project's NPV = -CF₀ + annual CF*PVAF(k,N) Project Alpha's NPV = $2,218,574; project Delta's NPV = $2,846,828; project Gamma's NPV = $1,535,507; project Sigma's NPV = $2,891,259.The total NPV of projects Alpha and Sigma combined = $5,109,833,which is the highest total NPV among the other possible combinations within the budget constraint.

A Firm Has a Budget Constraint of $40 Million to Invest