A capital-budgeting problem is defined as follows: three projects are to be evaluated at a MARR of 12.5% per year. No more than $3.0 million can be invested.
(a) Use a spreadsheet to select from the independent projects.
(b) After some study, it was determined that the life of project 3 can be increased from 5 to 8 years for the same $1 million investment; however, the estimated annual NCF would remain steady from year 5 on. Use Goal Seek to determine the NCF in year 1 and beyond for project 3 (as a bundle of one project) to have the same PW as the best bundle in part (a). All other estimates remain the same. With these new NCF and life estimates, what are the best projects for investment?
 FIGURE 1.png)
(a) Spreadsheet shows the solution. Select projects 1 and 2 for an investment of $3.0 million and
PW = $199,496.
 FIGURE 4.png)
(b) The Goal Seek target cell is D17 to equal $199,496 by changing cell D7. Result is a reduced year-one NCF requirement for project 3 to $136,705. However, with these changes for project 3, the best selection is now projects 1 and 3 with PW = $269,187.
 ANSWER.png)
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