Answer:
Only Projects B and C would be accepted.
Explanation:
Note: This question is not complete. See the attached pdf file for the complete question.
The explanation of the answer is now given as below.
Since there is an unlimited access to the capital, tTo decide which project to accept, we first calculate the net present values (NPVs) of Projects A, B and C to see which one have positive NPV.
Note: See the attached excel file for the calculation of the net present values (NPVs) of Projects A, B and C.
In the attached excel, the following formula is used:
Discounting Factor = 1/(1 + r)^n
Where;
r = Opportunity cost of capital or interest rate = 11%, or 0.11
n = the year under consideration
From the attached excel file, we have:
NPV of Project A = ($1,094) = -$1,094
NPV of Project B = $3,250
NPV of Project C = $2,200
Decision criterion: Accept projects with positive NPV and reject projects with negative NPV.
Conclusion:
Based on the, only projects B and C which have positive NPV of $3,250 and $2,200 respectively would be accepted, while project A with a negative NPV of -$1,094 would be rejected.
