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Which projects should hotel amazing implement

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Capital rationing: IRR and NPV approaches Hotel Amazing made a list of various independent projects it wants to launch with a fixed capital budget of $5.5 million. Management established that any unused portion of the fixed capital budget will earn less than the cost of capital of 12%. A summary of the independent projects are shown in the following table.

Project                  Initial investment             IRR                PV of inflows at 12%
A                $4,900,000                             17%              $5,600,000
B               900,000                                   19                 1,250,000
C                 2,100,000                              18                 2,250,000
D               1,600,000                                 15                   1,800,000
E             750,000                                        20                   920,000
F                 2,600,000                               19                   3,100,000
G                     1,250,000                              21                   1,310,000

Question a. Select the best group of projects based on the IRR of the various projects.

Question b. Select the best group of projects based on the net present value (NPV) of the various projects.

Question c. Are the projects selected in parts a and b the same? Why or why not?

Question d. Which projects should Hotel Amazing implement?

Reference no: EM132658947

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