Homework SourseCapital RationingSolutionRank of the projects on the basis o
Capital Rationing
Solution
Rank of the projects on the basis of PI
PI
Rank
Project
Investment required
1.35
1
2
250000
1.28
2
3
100000
1.25
3
1
400000
1.22
4
4
75000
1.06
5
6
50000
1.05
6
5
75000
1.04
7
8
250000
1.01
8
7
250000
Investible funds
500000
We are assuming that projects are divisible in nature so partial investment can be made in projects
Project
Investment required
NPV
2
250000
87951
3
100000
28031
1
150000
(98894/400000)*150000
37085.25
total
500000
153067.25
This is the best possible investment of 500000 into project at which NPV is maximum
| Rank of the projects on the basis of PI | |||
| PI | Rank | Project | Investment required |
| 1.35 | 1 | 2 | 250000 |
| 1.28 | 2 | 3 | 100000 |
| 1.25 | 3 | 1 | 400000 |
| 1.22 | 4 | 4 | 75000 |
| 1.06 | 5 | 6 | 50000 |
| 1.05 | 6 | 5 | 75000 |
| 1.04 | 7 | 8 | 250000 |
| 1.01 | 8 | 7 | 250000 |
| Investible funds | 500000 | ||
| We are assuming that projects are divisible in nature so partial investment can be made in projects | |||
| Project | Investment required | NPV | |
| 2 | 250000 | 87951 | |
| 3 | 100000 | 28031 | |
| 1 | 150000 | (98894/400000)*150000 | 37085.25 |
| total | 500000 | 153067.25 | |
| This is the best possible investment of 500000 into project at which NPV is maximum |
