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    Analyzing the given investment options

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    A firm has the following investment opportunities:

    Project A Project B Project C
    Investment $150,000 $125,000 $100,000
    NPV $30,000 $20,000 $25,000
    IRR 14% 11% 13%

    If the cost of capital is 10% and the capital budget is limited to $280,000, which project(s) should the firm undertake?

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    Solution Preview

    We observe that
    1. NPV of each project is a positive value.
    2. IRR of each project is higher than cost of capital i.e. 10%.

    So, all the three projects can be ...

    Solution Summary

    Solution selects the suitable project/s subject to the given budget constraint.