Question
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 12 percent. It will invest
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 12 percent. It will invest only $65,400 this year. It has determined the IRR for each of the following projects:
Project | Project Size | Internal Rate of Return |
A | $10,100 | 12.0% |
B | 20,100 | 12.5 |
C | 25,100 | 13.5 |
D | 10,100 | 14.0 |
E | 10,100 | 22.0 |
F | 20,100 | 15.0 |
G | 10,100 | 10.0 |
a. Pick out the projects that the firm should accept. (You may select more than one answer. Click the box with a check mark for the correct answer and click to empty the box for the wrong answer.)
- Project Bunanswered
- Project A unanswered
- Project D unanswered
- Project F unanswered
- Project E unanswered
- Project Gunanswered
- Project Cunanswered
b. If projects E and F are mutually exclusive, how would that affect your overall answer? That is, which projects would you accept in spending the $65,400? (You may select more than one answer. Click the box with a check mark for the correct answer and click to empty the box for the wrong answer.)
Project B unanswered
- Project A unanswered
- Project D unanswered
- Project F unanswered
- Project E unanswered
- Project G unanswered
- Project C unanswered
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