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A company is considering five investment opportunities
A company is considering five investment opportunities. The company's cost of capital is 12%. Data on these opportunities under consideration are given below: PhP ('000s) Project 1 2 3 4 5 Investment 35,000 20,000 25,000 10,000 9,000 PV@ 12% 39,325 22,930 27,453 10,854 8,749 NPV 4,325 2,930 2,453 854 (251) IRR (%) 16 15 14 18 11 PI 1.12 1.15 1.10 1.09 0.97 a) Based on the given data, rank the five projects in descending order of preference (1 being the most preferred) for each capital budgeting method (NPV, IRR, PI). b) Which project/s would you undertake if the company has PhP55 Million to spend? Justify.
Expert Solution
ANSWER
a)
RANKINGS OF THE CAPITAL BUDGETING IS AS FOLLOWS-
NPV - 1 , 2 , 3 , 4 then 5
IRR - 4 , 1 , 2 , 3 , 5
PI - 2 , 1 , 3 , 4 , 5
b)
project chosen based on 55 million is the company budget is PROJECT 1 AND 2
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