Your company is evaluating two projects and has collected the following information: Expected return (IRR) Risk...
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Your company is evaluating two projects and has collected the following information: Expected return (IRR) Risk Project A 12% Project B 7% Same as existing business Same as existing business Suggested source of financing Equity Long-term debt After-tax cost of financing 14% 5% The company currently has a capital structure consisting of 30% equity and 70% long-term debt. Part 1 Without doing any calculations, what should the company do and why? Reject both projects, since their expected returns are too low Accept only project B, since its expected return is greater than its cost of financing Accept only project A, since its expected return is greater than project B's Look for a better reason to make a decision Accept both projects, since they are not riskier than the existing business Accept only project B, since its cost of financing is less than project A's Attempt 1/25 for 1.5 pts. Your company is evaluating two projects and has collected the following information: Expected return (IRR) Risk Project A 12% Project B 7% Same as existing business Same as existing business Suggested source of financing Equity Long-term debt After-tax cost of financing 14% 5% The company currently has a capital structure consisting of 30% equity and 70% long-term debt. Part 1 Without doing any calculations, what should the company do and why? Reject both projects, since their expected returns are too low Accept only project B, since its expected return is greater than its cost of financing Accept only project A, since its expected return is greater than project B's Look for a better reason to make a decision Accept both projects, since they are not riskier than the existing business Accept only project B, since its cost of financing is less than project A's Attempt 1/25 for 1.5 pts.
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