Capital Rationing

Que - A company is experiencing capital rationing in year 0, when only $60,000 of investment finance will be available. No capital rationing is expected in future periods, but none of the three projects under consideration by the company can be postponed. The expected cash flows of the three projects are as follows. Project Year 0 Year 1 Year 2 Year 3 Year 4 $ $ $ $ $ A (50,000) (20,000) 20,000 40,000 40,000 B (28,000) (50,000) 40,000 40,000 20,000 C (30,000) (30,000) 30,000 40,000 10,000 The cost of capital is 10%. You are required to decide which projects should be undertaken in year 0, in view of the capital rationing, given that projects are divisible. Answer - The ratio of NPV at 10% to outlay in year 0 (the year of capital rationing) is as follows. Outlay in Project Year 0 PV NPV Ratio Ranking $ $ $ A 50,000 55,700 5,700 1.114 3rd B 28,000 31,290 3,290 1.118 2nd C 30,000 34,380 4,380 1.146 1st My que - I have calculated everything I am not sure about how did they get the ratios in this