You are the company financial manager of XYZ company.

XYZ can borrow (issue debt) at a 6% rate. XYZ has a Weighted Average Cost of capital of 8.5%. It funds projects that exceed its cost of capital by at least 2%.

1. In an environment of no resource constraints and unlimited capital funding opportunities: For each project, state whether or not you would invest your company resources on the project. Describe the reasons for your opinions. No calculations are required but submit any you use to support your answers.
2. Assume all projects require the same amount of human resources. In an environment where human resources and capital resources are limited, are there any projects that you would have invested resources in answer a. but would not be willing to invest resources in a limited environment. If so, list the project where your decision would change and the reason for the new decision. No calculations are required but submit any you use to support your answer.

Cash flows are in dollars

(Negative cash flow means company spending money)

(Positive cash flow is company collecting money)

IRR Year 0 Year 1 Year 2

Project A 20% 1,000,000 -200,000 -1,200,000

Project B 4% 1,000,000 - 40,000 -1,040,000

Project C 9% -1,000,000 90,000 1,090,000

Project D 15% -10.0 1.5 11.5