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How much does the budget limit cost the company

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Question - Peters Co. has $1 million allocated for capital expenditures. The opportunity cost of capital for each project is 11%. Investment NPV Project ($ thousands) ($ thousands) IRR (%) 1 300 66 17.2 2 200 -4 10.7 3 250 43 16.6 4 100 14 12.1 5 100 7 11.8 6 350 63 18.0 7 400 48 13.5.

(i) Which of the following projects should the company accept to stay within the $1 million budget?

(ii) How much does the budget limit cost the company in terms of its market value?

(iii) Explain how conflicts can arise between net present value (NPV) and internal rate of return (IRR) in investment decision making and which of the two is more directly aligned with the objective of maximizing shareholder value.

Reference no: EM132621863

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