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Five separate projects have calculated rates of return of 8, 11, 12.4, 14, and 19% per year. An engineer wants to know which projects
Five separate projects have calculated rates of return of 8, 11, 12.4, 14, and 19% per year. An engineer wants to know which projects to accept on the basis of rate of return. She learns from the finance department that company funds, which have a cost of capital of 18% per year, are commonly used to fund 25% of all capital projects. Later, she is told that borrowed money is currently costing 10% per year. If the MARR is established at exactly the weighted average cost of capital, which projects should she accept? Five separate projects have calculated rates of return of 8, 11, 12.4, 14, and 19% per year. An engineer wants to know which projects to accept on the basis of rate of return. She learns from the finance department that company funds, which have a cost of capital of 18% per year, are commonly used to fund 25% of all capital projects. Later, she is told that borrowed money is currently costing 10% per year. If the MARR is established at exactly the weighted average cost of capital, which projects should she accept?
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