You have done your due diligence in evaluating 4 potential projects. Each project will cost $100,000. Your NPV calculations have yielded the following results: Project A: $5,000 Project B: $0 Project C: $10,000 Project D: -$5000 The projects are not mutually exclusive and your budget is $400,000. Which project(s) would you choose?
A. C only
B. A and C only
C. A, B, C only
D. A, B, C, D
E. I wouldn't recommend any of the projects
The correct answer will be option B i.e. A and C only because both of these projects have resulted in a positive NPV. It will be impractical to accept project D since it resulted in a negative NPV and also project B since in this project there is no profit no loss situation (In other words it will not add any value to the firm)
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You have done your due diligence in evaluating 4 potential projects. Each project will cost $100,000....