Question
Kenforest Grocers' managers are determining the company's optimal capital budget for the next year. Kenforest is considering the following projects:' Project Size Return Risk A
Kenforest Grocers' managers are determining the company's optimal capital budget for the next year. Kenforest is considering the following projects:'
Project | Size | Return | Risk | |
A | $200,000 | 16% | High | |
B | 500,000 | 14 | Average | |
C | 400,000 | 12 | Low | |
D | 300,000 | 11 | High | |
E | 100,000 | 10 | Average | |
F | 200,000 | 10 | Low | |
G | 400,000 | 7 | Low | |
The company estimates that its WACC is 11%. All projects are independent. The company adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% from the WACC for low-risk projects. Which of the projects will the company accept?
A, B, C, E, F | ||
B, D, F, G | ||
A, B, C, E | ||
A, B, C, D, E | ||
A, B, C, F |
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