Question

Your company is evaluation 4 independent projects and is subject to capital rationing, detailed as follows:

Project  Initial Outlay    IRR      NPV

    1          2 million        18%   2,500,000

    2          1 million        15%      950,000

    3          1 million        10%      600,000

    4          3 million         9%    2,000,000

If you must select projects subject to a budget constraint of 3 million dollars, which set of projects should be accepted so as to maximize firm value?

		1 and 2
		1 only
		1, 2 and 3
		1 and 4
		2, 3 and 4

Answer 1