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Answer (C) is correct . Only two of the projects can be selected because three would require more than $450,000 of capital. Project S can immediately be dismissed because it has a negative net present value (NPV). Using the NPV and the profitability index methods, the best investments appear to be Q?and R. The internal rate of return (IRR) method indicates that P?is preferable to R. However, it assumes reinvestment of funds during Years 4 and 5 at the IRR (18.7%). Given that reinvestment will be at a rate of at most 12%, the IRR decision criterion appears to be unsound in this situation.

Answer (A) is incorrect because The amount of capital available limits the company to two projects.
Answer (B) is incorrect because The amount of capital available limits the company to two projects.
Answer (D) is incorrect because The profitability index and NPV are higher for R than P.