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Vang Enterprises, which is debt-free and finances only with equity from retained earnings, is considering 7 equal-sized capital budgeting projects. Its CFO hired you to
Vang Enterprises, which is debt-free and finances only with equity from retained earnings, is considering 7 equal-sized capital budgeting projects. Its CFO hired you to assist in deciding whether none, some or all of the projects should be accepted. You have the following information: rRF-4.50%; RPM-5-50%; and b-o 98 The company adds or subtracts a specified percentage to the corporate WACC when it evaluates projects that have above- or below-average risk. Data on the 7 projects are shown below. If these are the only projects under consideration, how large should the capital budget be? Expected Pro Risk Very low Low Average High Very high Very high Very high Risk factor return Cost (millions $25.0 $25.0 -2.00% -1.00% 0.00% 1.00% 2.00% 2.00% 2.00% 9.15% 0.10% 10.40% 10.80% 10.90% 13.00% $25.0 $25.0 $25.0 $25.0 $25.0
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