You are evaluating a set of 4 independent projects, whose annual cash flows are summarized in the table below (all figures are in $). Assume that the annual discount rate is 15% for all projects, and that all cash flows occur at the end of the year. Please consider each statement independently.
CF0 CF1 CF2 CF3
project 1 -55,000 25,000 27,000 29,000
project 2 -40,000 17,000 20,000 22,000
project 3 -40,000 12,000 140,000 -115,000
project 4 -15,000 48,100 -45,200 11,500
Now suppose that you are limited to a maximum initial investment of $55,000. Which project or a combination of projects would you implement under this capital constraint to maximize the total value created for the firm? What will be the impact (in dollars) on firm value? You can invest in a particular project only once.