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    A Firms Investment Opportunities

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    A firm has the following investment opportunities:


    Project A
    Investment $150,000
    NPV $30,000
    IRR 14%

    Project B
    Investment $120,000
    NPV $20,000
    IRR 13%

    Project C
    Investment $100,000
    NPV $25,000
    IRR 12%

    Project D
    Investment $ 10,000
    NPV $ 6,000
    IRR 11%

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

    project A, B, and C

    project A and C

    project A and B

    project A, B, and D

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    Solution Preview

    The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm's investment decisions would generally include expansion, acquisition, modernization and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision.
    Decisions like the ...

    Solution Summary

    The solution examines a firms investment opportunities.