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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 Returnn $4 million 5 million 3 million 2 million 6 million 5 million 6 million 3 million 12% 14.5 10 9 13 13 12.25 Ziege's WACC is 10.50%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% 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 Reject 4 Accept Accept Reject Accept Accept Reject
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