# Abu Luqman must determine what investment opportunities to undertake for his business Al-Afdhal Corporation. He is limited to a maximum expenditure of SR17, 500 only for this capital budgeting period.

Abu Luqman must determine what investment opportunities to undertake for his business Al-Afdhal Corporation. He is limited to a maximum expenditure of SR17, 500 only for this capital budgeting period.

a) According to IRR ranking project C with 37% IRR is selected first and then project E with 26% IRR.Total investment=5000+12500=\$17,500(within the range)

So their combined NPV=5500+500=\$6,000

b)

According to PI ranking project B with 2.30 PI is selected first and then project C with 2.10 PI and finally project D with 1.67 PI.Total investment=5000+5000+7,500=\$17,500(within the range)

So their combined NPV=5500+6500+5000=\$17,000

c)I would choose the second set of investment because it has higher NPV of \$17,000 than the first one with only \$6,000 as NPV

Asked on May 20, 2017 in