Refer to Problem 12 19 Management now decides to incorporate project risk differentials into the analysis The new policy is to add 2 percentage points to the cost of capital of those projects significantly riskier than average and to subtract 2 percentage points from the cost of capital of those th...

The firms marginal cost of capital is 1461 percent T ...

Refer to Problem 12-19. Management now decides to incorporate project risk differentials into the analysis. The new

Question:

Refer to Problem 12-19. Management now decides to incorporate project risk differentials into the analysis. The new policy is to add 2 percentage points to the of those projects significantly riskier than average and to subtract 2 percentage points from the of those that are substantially less risky than average. Management judges Project A to be of high risk, Projects C and D to be of average risk, and Project B to be of low risk. None of the projects is divisible. What is the optimal capital budget after adjustment for project risk?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...