Question

11.10

Constraints on borrowing.

Country​ Farmlands, Inc. is considering the following potential projects for this coming​ year, but has only​$200,000 for these​ projects:

Project​ A: Cost​ $60,000, NPV​ $4,000, and IRR​ 11%

Project​ B: Cost​ $78,000, NPV​ $6,000, and IRR​ 12%

Project​ C: Cost​ $38,000, NPV​ $3,000, and IRR​ 10%

Project​ D: Cost​ $41,000, NPV​ $4,000, and IRR​ 9%

Project​ E: Cost​ $56,000, NPV​ $6,000, and IRR​ 13%

Project​ F: Cost​ $29,000, NPV​ $2,000, and IRR​ 7%

What projects should Farmlands​ pick?

What projects should Farmlands​ pick?  ​

(Select the best​ responses.)

A. - A, C,​ D, and E.

B. - B, C,​ D, and F.

C. - A, B,​ D, and E.

D. - B, C,​ D, and E.

E. - C, D,​ E, and F.

Answer 1

Option 1 will be selected. Because with that option NPV of the all the project is highest of $17,000 and all investments are within $200,000.00

Therefore, Project A,C,D and E will be selected.