Question
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 13 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 13 percent. It will invest only $79,400 this year. It has determined the IRR for each of the following projects:
Project | Project Size | Internal Rate of Return |
A | $11,100 | 19.0% |
B | 31,100 | 17.0 |
C | 26,100 | 18.0 |
D | 31,100 | 16.0 |
E | 11,100 | 20.0 |
F | 21,100 | 15.0 |
G | 31,100 | 14.0 |
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 D
- Project F
- Project C
- Project A
- Project E
- Project G
- Project B
b. If projects B and E are mutually exclusive, how would that affect your overall answer? That is, which projects would you accept in spending the $79,400? (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 D
- Project B
- Project A
- Project F
- Project E
- Project G
- Project C
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