Five separate projects have calculated rates of return of 7, 11, 15, 18, and 20

Question

Five separate projects have calculated rates of return of 7, 11, 15, 18, and 20 percent     per year. An engineer wants to know which projects to accept on the basis of the rate      of return. She learns from the finance department that company funds which have a          cost of capital of 16% per year are used to fund 30% of all             capital projects. Later, she is             told that borrowing money is currently costing 10 percent per year. If the MARR is    established at exactly the weighted average cost of capital, which projects should she     accept?

Explanation / Answer

16% rate * 30% = 4.8% 10% rate * 70% = 7% cost is 11.8% So you should accept the 15,18,and 20% RoR projects

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