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Which of the projects will the company accept? (a) No budget limitation (b) subject to budget Rate of Project Required investment in millions) Risk-adjusted WACC
Which of the projects will the company accept? (a) No budget limitation (b) subject to budget Rate of Project Required investment in millions) Risk-adjusted WACC Excess Return Ranking Available Capital Return Ranking A $200 16.0% B 500 14.0 200 12.5 D 300 11.5 E 350 10.7 F 200 10.0 G 400 5.0 Except for projects B and C are mutually exclusive, all the other projects are independent. Projects A, D, and F are high-risk projects, projects B and C are average-risk projects; while projects E and G are low-risk projects. The company estimates that its WACC is 8%. 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 of $900. Select one: O a. A,B,C O. C, E, F O c. A, C, D O d. A, D, E O e AB
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