There are 4 projects under consideration for investment purposes

Finance Sep 25, 2020

There are 4 projects under consideration for investment purposes. Their initial costs and NPVs are listed in the following table.

Project A B C D

Initial cost $20 $30 $35 $50

NPV $5 $8 $9 $15

Total funds available is $60. A and B are mutually exclusive. B and C are mutually exclusive. What project(s) should be selected to obtain the largest aggregate NPV?

Expert Solution

Aggregate NPV from both projects = 5+8 = 13

Investment of two projects (with in available funds) =20+ 30= 50

So,

Aggregate NPV from all other combinations give lower NPV aggregate

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