Table 10.4
A firm must choose from six capital budgeting proposals outlined below.The firm is subject to capital rationing and has a capital budget of $1,000,000; the firm's cost of capital is 15 percent.
-Using the net present value approach to ranking projects,which projects should the firm accept? (See Table 10.4)

Question

Table 10.4
A firm must choose from six capital budgeting proposals outlined below.The firm is subject to capital rationing and has a capital budget of $1,000,000; the firm's cost of capital is 15 percent. 
-Using the net present value approach to ranking projects,which projects should the firm accept? (See Table 10.4)

Quizplus · Accepted Answer

Based on the net present value approach, only projects with positive net present values should be accepted. Projects 2 and 4 have negative net present values, so they should be rejected. Projects 1, 3, 5, and 6 have positive net present values, so they should be accepted. Therefore, the best choice(s) are B, which includes projects 1, 3, 5, and 6.

Table 10.4 A Firm Must Choose from Six Capital Budgeting Proposals Outlined