Question

Constraints on borrowing Country Farmlands, Inc. is considering the following potential projects for this coming year, but has only $200,000 for these projects: Cost $60,000, NPV S4.000, and IRR 11% Project A: Project B: Cost $78,000, NPV S6,000, and IRR 12% Project C: Cost S38 000, NPV $3.000, and IRR 10% Project D: Project E: Cost S56.000, NPV S6,000, and IRR 13% Project F: Cost S29.000. NPV $2.000, and IRR 7% Cost S4 1,000, NPV $4,000, and IRR 9% What projects should Farmlands pick? What projects should Farmlands pick? (Select the best responses.) O A. B, C, D, and F OB. A. C, D, and E ° C. B. C. D, and E ○ D. C, D, E, and F O E. A, B, D, and E

Answer 1

Table showing values of NPV and total costs of possible combination of projects is as follows:

Projects	NPV $	TOTAL COSTS $
A,B,C	(4000 + 6000 + 3000) 13000	(60000 + 78000 + 380000) 176000
A,B,D	(4000 + 6000 + 4000) 14000	(60000 + 78000 + 41000) 179000
A,B,E	(4000 + 6000 + 6000) 16000	(60000 + 78000 + 56000) 194000
A,B,F	(4000 + 6000 + 2000) 12000	(60000 + 78000 + 29000) 167000
A,C,D,E	(4000 + 3000 + 4000 + 6000) 17000	(60000 + 38000 + 41000 + 56000) 195000
A,C,D,F	(4000 + 3000 + 4000 + 2000) 13000	(60000 + 38000 + 41000 + 29000) 168000
A,C,E,F	(4000 + 3000 + 6000 + 2000) 15000	(60000 + 38000 + 56000 + 29000) 183000
A,D,E,F	(4000 + 4000 + 6000 + 2000) 16000	(60000 + 41000 +  56000 + 29000) 186000
B,C,D,F	(6000 + 3000 + 4000 + 2000) 15000	(78000 +38000 + 41000 + 29000) 186000
B,C,E	(6000 + 3000 + 6000) 15000	(78000 + 38000 + 56000) 172000
B,D,E,	(6000 + 4000 + 6000) 16000	(78000 + 41000 + 56000) 175000

C,D,E,F

(3000 + 4000 + 6000 + 2000) 15000

(38000 + 41000 + 56000 + 29000) 164000

The project A,C,D,E has the highest NPV among all the alternatives within the cost bar of $ 200000.

Thus, this project should be adopted.