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Hi there,
I have the following question below:
A company with investment funds for the present year limited to $150,000 has identified a number of potential investment projects which are listed below along with their relative cost and expected NPV.
$ $
Project Investment NPV
L (15,000) (3,000)
M 75,000 15,240
N 24,000 12,600
O 82,000 22,456
P 35,000 5,000What is the optimal NPV the company can earn assuming that all the projects are divisible?
The answer is $44,045 instead of $43,997 which is the answer I initially had.
I believe the negative 15k is an advanced investement but why is it adjusted in the optimal NPV calc? Why is it added onto the limited 150k investment funds and why are we including in the calculation?
Thank you
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