On this page
Calculate the net NPV-to-cost ratios
| Project | Cost | NPV | Net ratio |
|---|---|---|---|
| A | 60 | 40 | 0.666667 |
| B | 50 | 32 | 0.64 |
| C | 50 | 32 | 0.64 |
Follow the ratio-ranked choice
A has ratio 40/60 ≈ 0.666667, slightly above 32/50 = 0.64 for B and C. Selecting A first uses 60 and leaves 40, which cannot fund either remaining whole project. Its total NPV is 40.
List all eight candidate sets
| Set | Initial cost | Total entered NPV | Feasible |
|---|---|---|---|
| Empty | 0 | 0 | Yes |
| A | 60 | 40 | Yes |
| B | 50 | 32 | Yes |
| A + B | 110 | 72 | No |
| C | 50 | 32 | Yes |
| A + C | 110 | 72 | No |
| B + C | 100 | 64 | Yes |
| A + B + C | 160 | 104 | No |
Identify the objective within this model
B + C costs 100 and produces total NPV 64. It is the highest value among the feasible sets in this example. The result assumes independent additive NPVs, no prerequisites and no later-period funding constraints.