Question

XYZ Inc., has $100 to spend on capital budgeting projects. Which combination of projects should the company undertake? Note that the goal is choose the combination of projects that maximizes the firm’s value.

Project	cost	NPV	IRR
A	$30	$9	20%
B	$60	$15	13%
C	$45	$20	12%
D	$35	$13	17%
E	$25	$12	16%

a. C, A
b. C, E
c. C, E, A
d. B, C, D

Answer 1

	RANKING OF THE PROJECTS WITH THERE GREATER NPV
	Project	cost	NPV	IRR	RANKING
	A	$30	$9	20%	5
	B	$60	$15	13%	2
	C	$45	$20	12%	1
	D	$35	$13	17%	3
	E	$25	$12	16%	4
	We have total amount to spend is only $ 100, so we can choose the project as below
	Value of the combination for Project A & C
	A	$30	$9	20%
	C	$45	$20	12%
	Total	$                        75	$                    29
	Value of the combination for Project C & E
	C	$45	$20	12%
	E	$25	$12	16%
	total	$                        70	$                    32
	Value of the combination for Project C , E & A
	C	$45	$20	12%
	E	$25	$12	16%
	A	$30	$9	20%
	total	$                     100	$                    41
	Value of the combination for Project B,C D is not possible because the investment value exceed $ 100
	So, as per the above the combination of C,E &A have the greater combination because the value of the
	project is grater in this combination and full utilization of $ 100
	Answer = Option C = C,E,A