Question
Bradford, Inc is evaluating the following projects based on their weighted average cost of capital. Assume Bradford can raise money at the rate of 11%
Bradford, Inc is evaluating the following projects based on their weighted average cost of capital. Assume Bradford can raise money at the rate of 11% using the combination of debt and retained earnings, and at the rate of 14% if they use the combination of debt and a new issue of common stock. Bradford does not use preferred stock. If Bradford can raise $40,000,000 at the 11% rate, which of the following project(s) should they undertake?
Project Cost Return
A $30,000,000 18.0%
B $10,000,000 16.0%
C $10,000,000 15.0%
D $20,000,000 12.0%
(a) Project A & B
(b) Projects B, C, & D
(c) Projects A, B, C, & D
(d) Projects A, B, & C
(e) none of the Projects should be undertaken
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