Investment Decision Concepts
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Question
As a chief financial officer of Delta Pharmaceuticals, you recently received a capital expenditure analysis from your financial team. The two selection criteria results are presented below:
Your company has only $1 million allocated for capital expenditures. The cost of capital for each project is 11 per cent.
|
Investment |
NPV |
IRR |
|||
|
Project |
($,000) |
($,000) |
(%) |
||
|
1 |
300 |
66 |
17.2 |
||
|
2 |
200 |
-4 |
10.7 |
||
|
3 |
250 |
43 |
16.6 |
||
|
4 |
100 |
14 |
12.1 |
||
|
5 |
100 |
7 |
11.8 |
||
|
6 |
350 |
63 |
18 |
||
|
7 |
400 |
48 |
13.5 |
||
Which of the above projects should the company accept to stay within the $1 million budget?
Summary
The question belongs to Finance and it discusses about project selection in investment decision.
Total Word Count 72
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