# If there is no capital-rationing constraint, which project should be selected? If there is a capital-rationing constraint, how should the decision be made

University of Phoenix. Business For Finance. Week 4 Assignment.
April 2011
FINANCIAL MANAGEMENT – PRINCIPLES AND APPLICATIONS CHAPTER 10
INTEGRATIVE PROBLEM
11. Caledonia is considering two investments with one-year
lives. The more expensive of the two is the better and will produce
more savings. Assume these projects are mutually exclusive and that
the required rate of return is 10 percent. Given the following
after-tax net cash flows: YEAR PROJECT A PROJECT B 0 –\$195,000
–\$1,200,000 1 240,000 1,650,000
A. Calculate the net present value.
B. Calculate the profitability index.
C. Calculate the internal rate of return.
D. If there is no capital-rationing constraint, which project
should be selected? If there is a capital-rationing constraint, how

A. Calculate the net present value
NPV Project A= -195000 + (240000/1.10) = -195000 + 218182 =
\$23,182
NPV Project B= -1200000 + (1650000/1.10) = -1200,000 + 1500,000
= 300,000

### Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now

PLACE THIS ORDER OR A SIMILAR ORDER WITH BEST NURSING TUTORS TODAY AND GET AN AMAZING DISCOUNT

The post If there is no capital-rationing constraint, which project should be selected? If there is a capital-rationing constraint, how should the decision be made appeared first on BEST NURSING TUTORS .