A firm’s current investment opportunity schedule and the weighted marginal cost

Question

A firm’s current investment opportunity schedule and the weighted marginal cost of capital
schedule are shown below.
Investment Initial
Opportunity Schedule IRR Investment
A 15% 200,000
B 12 300,000
C 19 100,000
D 10 400,000
E 16 300,000
Weighted Marginal Cost of Capital
Range of Total New Financing WMCC
$0-$250,000 7.5%
250,001-500,000 8.9
500,001-1,000,000 10.0
1,000,001-1,500,000 12.0
The investment opportunities which should be selected are

Answer
A. A, B, C, and D.
B. A, B, C, and E.
C. A, B, D, and E.
D. B, C, D, and E.

Explanation / Answer

It makes sense to do projects A,B,C, and E. (B) Project D would require 12% capital and it only returns 10% so it should not be done.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.