A company has Rs. 7 Crore available for investment. It has evaluated its options and has found that only 4 projects given below have positive NPV. All these investment are divisible Advise the management which investments projects it should select.
Out of the available Rs. 7 Cr, the first two projects selected on the basis of Profitability index viz Z and W. The total amount of investment required to invest in both the projects amounted Rs 8.50 Cr but the financial constraint is Rs.7 Cr. By considering the constraint, the first project fully accepted and the part of the next project W accepted for the remaining amount of corpus available by considering to maximize the NPV of the project as a whole.
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