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ADJUSTING COST OF CAPITAL FOR RISK Ziege Systems is considering the following independent projects for the coming year: Required Rate of Risk High High LoW
ADJUSTING COST OF CAPITAL FOR RISK Ziege Systems is considering the following independent projects for the coming year: Required Rate of Risk High High LoW Average High Average Low Low Project Investment Return $4 million 5 million 3 million 2 million 6 million 5 million 6 million 3 million 14% 11.5 9.5 8.5 12.5 12.5 6.5 11.5 zege's WACC is 10.00%, but it adjusts for risk by adding 296 to the WACC for high-risk projects and subtracting 296 for low-risk projects a. Which projects should Ziege accept if it faces no capital constraints? Project A Project B Project C Project D Project E Project F Project G Project H Select- Select- v Select- ? Select- ? Select- ? Select- Select- v Select- v b. If Ziege can only invest a total of $13 million, which projects should it accept? Project A Project B Project C Project D Project E Project F Select- Select- v Select- v Select- ? Select 7 Select
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