Determining which small projects should be funded

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Leslie is charged with determining which small projects should be funded. Along with this assignment, she has been granted the use of $15,000 for a maximum of two years. She is considering three projects. Project A costs $7,500 and has cash flows of $4,000 a year for Years 1 to 3. Project B costs $8,000 and has cash flows of $3,000, $4,000, and $3,000 for Years 1 to 3, respectively. Project C costs $2,000 and has a cash inflow of $2,500 in Year 2. What decisions should she make regarding these projects if she assigns them a mandatory discount rate of 8.5 percent? Explain why. accept either Projects A and C or Projects B and C, but not all three as there is insufficient financing accept Project C and reject Projects A and B because only Project C has a discounted payback that is less than two years accept Projects A and C and reject Project B as they have the shortest discounted payback periods than fit within the $15,000 allocation accept Projects A and C and reject Project B as A and B payback within two years accept Projects B and C and reject Project A as this combination uses the most initial capital.

Reference no: EM131085645

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