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Jake's Plumbing Company is looking at the following projects: Project Investment Cost ($) IRR A $2 million 10% B $4 million 14% C $2 million
Jake's Plumbing Company is looking at the following projects: Project Investment Cost ($) IRR A $2 million 10% B $4 million 14% C $2 million 13% The finance department (let's say this is a big plumbing company) has estimated the weighted marginal cost of capital to be the following: Funding Raised WMCC Up to $2 million 10% Up to $4 million 13% More than $4 million 14% Thus, the first 2 million costs 10%, the 2 million after that costs 13%, and any funding after costs 14%. What projects should be chosen to maximize share holder value?
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