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.
Project 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 15% $50,000
6 $400,000 15% $150,000
1. Using the internal rate of return approach to ranking projects, which projects should the firm accept?
2. Using the net present value approach to ranking projects, which projects should the firm accept?