Problem

Imperial Systems has $1 million available for capital investments during the current yea...

Imperial Systems has $1 million available for capital investments during the current year. A list of possible investment projects, together with their net investments and net present values, is provided in the following table:

a. Rank the various investment projects in terms of their profitability indexes (computed to three decimal places).

b. In the order of decreasing profitability index values and considering the capital constraints, which projects should be adopted? Are all capital funds expended?

c. Is there another combination that produces a higher aggregate net present value than the one developed in part b?

d. If less than the entire amount of available funds is invested, what is the opportunity cost of the unused funds?

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Solutions For Problems in Chapter 10