A Firm Must Choose from Six Capital Budgeting Proposals Outlined

Multiple Choice

A firm must choose from six capital budgeting proposals outlined below. The firm is subject to capital rationing and has a capital budget of $1,000,000; the firm's cost of capital is 15 percent.
$\begin{array}{rrrr}\text { Project }&\text { Initial Investment }&IRR&NPV\\1 & \$ 200,000 & 19 \% & \$ 100,000 \\2 & 400,000 & 17 & 20,000 \\3 & 250,000 & 16 & 60,000 \\4 & 200,000 & 12 & -5,000 \\5 & 150,000 & 20 & 50,000 \\6 & 400,000 & 15 & 150,000\end{array}$
-Using the net present value approach to ranking projects, which projects should the firm accept? (See Figure 12.6)

A) 1, 2, 3, 5, and 6
B) 2, 3, 4, and 5
C) 1, 2, 3, 4, and 5
D) 1, 3, 5, and 6