Problem

Suppose in the capital budgeting model in Figure 6.4 that each investment requires $2000...

Suppose in the capital budgeting model in Figure 6.4 that each investment requires $2000 during year 2, and only $5000 is available for investment during year 2.

a. Assuming that available money uninvested at the end of year 1 cannot be used during year 2, what combination of investments maximizes NPV?

b. Suppose that any uninvested money at the end of year 1 is available for investment in year 2. Does your answer to part a change?

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Solutions For Problems in Chapter 6

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