Docs R Us has just finished evaluating several projects. Their cost of capital is 10%. NPV’s are calculated by the firm’s current cost of capital.

9%

A. With no capital rationing, and assuming the projects are of the same risk, which projects should Docs R Us accept? Why?

B. If Docs R Us has a capital budget limit of $40,000, and assuming the projects are of the same risk, which projects should they accept? Why?