Question: You are a resource economist for the US Fish and Wildlife Service. Your agency recently acquired 20,000 acres to be managed for wildlife habitat. Wildlife biologists in the agency have developed the following 6 project alternatives using a 6 percent discount rate.
| Project |
Investment Amount |
NPV |
IRR |
| 1 |
$300,000 |
$21,000 |
10% |
| 2 |
$700,000 |
$35,000 |
8% |
| 3 |
$200,000 |
$7,500 |
11% |
| 4 |
$500,000 |
$10,000 |
7% |
| 5 |
$900,000 |
$-50,000 |
4% |
| 6 |
$600,000 |
$40,000 |
15% |
1. Which project(s) should you choose, assuming the projects are independent of each other (i.e., not mutually exclusive) and you have an unlimited budget?
2. Which project(s) should you choose, assuming the projects are mutually exclusive of each other and you have an unlimited budget?
3. Which project(s) should you choose, assuming the projects are mutually exclusive of each other, you have a $550,000 budget, and the projects are not divisible or repeatable?
4. Which project(s) should you choose, assuming the projects are independent, divisible and you have a $1,000,000 budget?