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6 Mar 2018
Texas Transport has five possible investment projects for the coming year. Each project is indivisible. They are:
Project Investment (million IRR
A $ 6 18%
B $10 15%
C $9 20%
D $4 12%
E $3 24%
The firm's weighted marginal cost of capital schedule is 12 percent for up to $6 million of investment; 16 percent for between $6 million and $18 million of investment; and above $18 million the weighted cost of capital is 18 percent. The optimal capital budget is:
$12 million.
$18 million.
$23 million.
$28 million.
Texas Transport has five possible investment projects for the coming year. Each project is indivisible. They are:
Project Investment (million IRR
A $ 6 18%
B $10 15%
C $9 20%
D $4 12%
E $3 24%
The firm's weighted marginal cost of capital schedule is 12 percent for up to $6 million of investment; 16 percent for between $6 million and $18 million of investment; and above $18 million the weighted cost of capital is 18 percent. The optimal capital budget is:
$12 million.
$18 million.
$23 million.
$28 million.
Bunny GreenfelderLv2
7 Mar 2018
Related questions
| 28. Cranberry Industries, Inc. is in the process of determining its optimal capital budget for next year. The following investment projects are under consideration: Required Expected Rate Project Investment of Return A $5 million 18.0% B 5 million 15.0% C 2 million 14.5% D 2 million 14.0% E 6 million 13.5% F 3 million 13.0% G 5 million 12.5% The firm's marginal cost of capital schedule is as follows: Amount of Funds Raised Cost $0 - $5 million 12.0% $5 million - $10 million 12.5% $10 million - $18 million 13.5% Over $18 million 15.0% Determine Cranberry's optimal capital budget (in dollars) for the coming year. |
A. $14 million
B. $17 million
C. $20 million
D. $28 million
