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Capital Rationin g . You are a manager with an investment budget of $8 million. You may invest in the following projects. Investment and cash-flow figures are in millions of dollars. P r oject...

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Capital Rationin g . You are a manager with an investment budget of $8 million. You may invest in the following projects. Investment and cash-flow figures are in millions of dollars.

P r oject

Discount

Rat e , %

I n v estment

An n ual

Cash Fl o w

P r oject Lif e , Y ea r s

A

10

3

1

5

B

12

4

1

8

C

8

5

2

4

D

8

3

1.5

3

E

12

3

1

6

a. Why might these projects have different discount rates?

b. Which projects should the manager choose?

c. Which projects will be chosen if there is no capital rationing?

Answered Same Day Dec 25, 2021

Solution

Robert answered on Dec 25 2021
107 Votes
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