Rock Company uses a process of capital rationing in its decision-making. The firms cost of capital is 12 percent. It will invest only $80,000 this year. It has determined the internal rate of return for each of the following projects.

Project. Project Size Percent of Internal Rate of Return

A..........................$15,000.14% B..........................25,000...19

C..........................30,00010

D..........................25,00016.5

E..........................20,000.....21

F..........................15,000..11

G..........................25,000..18

H..........................10,000..17.5

a. Pick out the projects that the firm should accept.

b. If Projects B and G are mutually exclusive, how would that affect your overall answer? That is, which projects would you accept in spending the $80,000?