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A firm is considering three investment projects which we will refer to as A, B, and C. Each project has an initial cost of $10
A firm is considering three investment projects which we will refer to as A, B, and C. Each project has an initial cost of $10 million. Investment A offers an expected rate of return of 16%, B of 8%, and C of 12%. The firm's cost of capital is 6% if it borrows $10 million, 10% if it borrows $20 million, and 15% if it borrows $30 million. Which project(s) should the firm invest in? Select one: O A. Just A, because it offers the highest rate of return and is the only investment that has a rate of return higher than 15% B. Only A and C should be undertaken because both have rates of return that are greater than C. None of the above is correct. o D. All three should be undertaken, because the rate of return on B is above 6%, on C is above
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