Accounting Multiple Choice Question – 3 November 2022

A company can only invest £1 million in the current period.

• project 1 – capital requirement (current period) £1.2m with an NPV of £5m
• project 2 – capital requirement (current period) £1.0m with an NPV of £2.5m
• project 3 – capital requirement (current period) £0.6m with an NPV of £1.5m
• project 4 – capital requirement (current period) £0.4m with an NPV of £1.2m
• project 5 – capital requirement (current period) £0.4m with an NPV of £1.0m

Which project(s) should the company undertake to maximise its shareholders’ wealth?

Select ONE answer:

1. 1
2. 2
3. 3 and 5
4. 3 and 4

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

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