Suppose a Company Has the Following Information on Six Independent

question 91

Essay

Suppose a company has the following information on six independent projects:

a)Find the IRRs of the six projects.
b)Which projects should the company undertake if it has no capital constraints? Why?
c)What is the impact on the company's shareholder value in (b)?
d)Which projects should the company undertake if it has a capital constraint of $15 million? Why?
e)What is the loss to the company from the capital rationing constraint in (d)?

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Definitions:

World of Being

In Plato’s metaphysics, the world of ideal Forms, a world that is unchanging, a world we can know only through reason.

Berkeley

Represents George Berkeley, an 18th-century philosopher known for his theory of immaterialism, arguing that material objects exist only in the mind and through perception.

Esse Est Percipi

A Latin phrase meaning "to be is to be perceived," associated with George Berkeley's idealist philosophy which argues that objects only exist to the extent that they are perceived.

Subjective Idealism

The view that nothing exists except ideas and minds. The eighteenth-century idealist George Berkeley held the extreme position of subjective idealism, which, simply summarized, insisted that “to be is to be perceived” (esse est percipi). According to Berkeley, it makes no sense to believe in the existence of anything that we cannot experience.