The capital budgeting manager of Conscientious Construction Company (CCC) submitted the following report to the CFO: CCC

Question:

The manager of Conscientious Construction Company (CCC) submitted the following report to the CFO:

Risk Project IRR 9.0% Low B 10.0 12.0 Average High

CCC generally takes risk into consideration by adjusting its average required rate of return (r), which equals 8 percent, when evaluating projects with risks that are either lower or higher than average. A 5 percent adjustment is made for high-risk projects, and a 2 percent adjustment is made for low-risk projects. If the above projects are independent, which project(s) should CCC purchase?

Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...