OPTIMAL CAPITAL BUDGET Hampton Manufacturing estimates that its WACC is 12.5%. The company is considering the following seven investment projects; Project Size $750,000 1,250,000 1,250,000 1,250,000 750,000 750,000 750,000 IRR 14,0% 13.5 13.2 13.0 12.7 12.3 12.2 a. Assume that each of these projects is independent and that each is just as risky as the firm's existin g assets. which set of projects should be accepted Project A Project B Project C Project D Project Project F Project G What is the firm's optimal capital budget? write out your answer completely. For example, 13 million should be entered as 13,000,000 projects should be b. Now assume that Projects C and D are mutually excluslve. Project D has an py of $400,000, whereas Project C has an NPy of $350,000 which set of accepted7 Project A Project B Project C Project D Select a. Assume that each of these projects is independent and that each is just as risky as the firm's existing ansets. Which set of projects should be accepted?) Project A Project B Project C Project D Project E Project F Project G what is the firm's optimal capital budget? wite out your anower complately foramp answer oompletely. For example, 13 million should be entered as 13,000,000 b. Now assume that Projects C and D ar e mutually exclusive. Project D has an NPV of $400,000, whereas Project C has an NPV of $350,000. which set of projects should be accepted Project A Project B Project C Project D Project E Project F Project G What is the ficm's optimal capital budget in this case? virite out your answer completely, For e example, 13 million should be entered as 13,000,000 s to incorporate project risk differentials. The company adds 2% to the WACC of those projects t less risky than average. which set of projects should be ad c. Ignore Part b and now assume that each of the prolects is independent but that management decides to incorporate p anegement judges Projects n, C, D and E to havo average risk, Project A to hive high risk, and projects, and a to have low risk. T risky than average, and it subtracts 2% from the WACC of those prolects that are substantialy Select Project A Project B Project C Project D project E : Problem Set Chapter 12 Project E Project F Project G What is the firm's optimal capital budget? ? write out your answer completely. For example, 13 million should be entered as 13,000,000 b. Now assume that Projects C and D are mutually exdlusive. Projed D ha an y o 00,000,rot chas an Nv of s350,00, which set of pr exclusive. Projet D has an uv of $400,000, whereas Project c has an NPV of $350,000. which set of projects should be accepted Project A Project B Project C Project D Project Project Project What is the firm's optimal capital budget in this case? wwite out your answer completely For example, 13 lie Selet should be entered as 13,000,000 of the projects is independent but that management decides to incorporate project risk dfferertials. Management judges Projects 8, c,o to have high risk, wd pyejects F and G to have low risk. The company a ds 2% to the wACC of those projects that are iplicantly more risky than average, and it subtracts 2% from the WACC of those projects that are substantially less risky than ,verage, which set of profects should be accepted Project A Project 8 Project C Project Project E Project F Project G What is the fir's optimal capital budget in this case? write out your answer coempletely. elect For example, 13 million should be entered as 13,000.000
