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A firm has a capital budget of $3,000 and a WACC of 8%
A firm has a capital budget of $3,000 and a WACC of 8%. Should the firm choose
project A : Yes or No
project B : Yes or No
project C : Yes or No
project D : Yes or No
project E : Yes or No
| Project | Cost | NPV | IRR |
| A | $1,000 | $2,000 | 10% |
| B | $1,000 | $1,500 | 13% |
| C | $1,000 | $3,000 | 12% |
| D | $1,000 | $2,500 | 14% |
| E | $1,000 | $500 | 15% |
Expert Solution
We should select the projects which have higher NPV.
Here projects C,D and A have higher NPV's and the cost is 3000. Hence, those three projects have to be selected.
Projects B and E are to be rejected
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