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Which of the projects will the company accept? (a) No budget limitation (b) subject to budget Project Required investment (in millions) Risk- adjusted WACC NPV
Which of the projects will the company accept? (a) No budget limitation (b) subject to budget Project Required investment (in millions) Risk- adjusted WACC NPV (in Profitability millions) Index Ranking Available Capital Ranking A $200 H, $50 B 70 H, 45 150 L, 40 D 30 A, 30 E 120 H 20 F 100 A, 15 G 50 L, 10 H 10 L, 5 Except for projects C and D are mutually exclusive, all the other projects are independent. Project A and C are high-risk project; project B and F are average-risk projects; while project D, E, and G are low-risk project. The company estimates that its WACC is 10.5%. The company adjusts for risk by adding 2 percentage points to the WACC for high-risk projects, and subtracting 2 percentage points from the WACC for low-risk projects. The company has a limited capital budget at $400. Select one: a. A, B, C 0 b. A, B, D, G, H O c. A, B, D, F, H O d. B, D, F, H e. B, C, D, F
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