Question
The Ajax Corporation has the following set of projects available to it: Project Investment Required Expected Rate of Return ($ Million) (%) A 500 23.0
The Ajax Corporation has the following set of projects available to it:
Project | Investment Required | Expected Rate of Return |
---|---|---|
($ Million) | (%) | |
A | 500 | 23.0 |
B | 100 | 18.0 |
C | 50 | 21.0 |
D | 125 | 16.0 |
E | 300 | 14.0 |
F | 150 | 13.0 |
G | 250 | 19.0 |
Note: All projects have equal risk.
Calculate the cumulative investment and complete Ajax's schedule of potential projects. (Hint: Ajax prioritizes projects according to their expected rates of return.)
Project | Investment Required | Expected Rate of Return | Cumulative Investment |
---|---|---|---|
($ Million) | (%) | ($ Million) | |
A | 500 | 23.0 | 500 |
C | 50 | 21.0 | 550 |
B | 100 | 18.0 | 900 |
E | 300 | 14.0 | 1,325 |
|
What is the optimal capital budget (in millions) for Ajax? $1,025 $900 $1,300 $1,000 |
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