The Suboptimal Glass Company uses a process of capital rationing in its decision

Question

The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm’s cost of capital is 10 percent. It will only invest $70,200 this year. It has determined the internal rate of return for each of the following projects.

a. Pick out the projects that the firm should accept. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
  

b. If Projects C and F are mutually exclusive, which projects would you accept in spending the $70,200? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

Project Project Size Internal Rate
of Return A $ 26,300 17 % B 31,300 11 C 26,300 20 D 11,300 18 E 11,300 19 F 21,300 21 G 16,300 16

a. Pick out the projects that the firm should accept. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
  

Project A Project G Project E Project C Project F Project B Project D

b. If Projects C and F are mutually exclusive, which projects would you accept in spending the $70,200? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

Project A Project B Project E Project C Project F Project G Project D

Explanation / Answer

it would accept all prjects having IRR more than the cost of capital that is 10%

SO, accept Projects F,C,E,D..Total capital required will be 21300+26300+11300+11300=70200

If projects C and F are mutually exclusive, accept F,E,D,A..Total capital required will be 21300+11300+11300+26300=70200

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