Which of the projects will the company accept?

					(a) No budget limitation	(b) subject to budget
Project	Required investment (in millions)	Rate of Return	Risk-adjusted WACC	Excess Return	Ranking	Available Capital	Ranking
A	$300	16.0%
B	400	15.5
C	400	12.0
D	100	11.7
E	100	10.0
F	200	9.0
G	350	8.5

Except for projects F and G are mutually exclusive, all the other projects are independent. Project A and C are high-risk project; project B and E are average-risk projects; while project D, F, and G are low-risk project. The company estimates that its WACC is 9%. The company adjusts for risk by adding 3 percentage points to the WACC for high-risk projects, and subtracting 3 percentage points from the WACC for low-risk projects. The company has a limited capital budget at $900.

Select one:

a. A, B, D, E

b. B, C, E

c. A, B, F

d. B, D, G

e. B, C, E, F

Which of the following statements is CORRECT? Select one: a. Other things equal, the payback period of a project remains the same when the WACC decreases. b. Other things equal, the IRR of a project increases when the WACC decreases. c. Other things equal, the discounted payback period of a project increases when the WACC decreases. d. Other things equal, the NPV of a project increases when the WACC increases. e. Other things equal, the possibility to reject a project using the IRR method decreases if the WACC increases.