b. A, B

c. A, B, C

d. A

e. B, C

Question 9

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Which of the projects will the company accept?

					(a) No budget limitation	(b) subject to budget
Project	Required investment (in millions)	Rate of Return	Risk-adjusted WACC	Excess Return	Ranking	Available Capital	Ranking
A	$200	16.0%
B	500	14.0
C	200	12.5
D	300	11.5
E	350	10.7
F	200	10.0
G	400	5.0

Except for projects B and C are mutually exclusive, all the other projects are independent. Projects A, D, and F are high-risk projects; projects B and C are average-risk projects; while projects E and G are low-risk projects. The company estimates that its WACC is 8%. The company adjusts for risk by adding 2 percentage points to the WACC for high-risk projects and subtracting 2 percentage points from the WACC for low-risk projects. The company has a limited capital budget of $900.

Select one:

a. A, C, D

b. C, E, F

c. A, B

d. A, B, C

e. A, D, E