3. Problem 10.05 Problem 10-5 Project Selection Midwest water works estimates th

Question

3. Problem 10.05 Problem 10-5 Project Selection Midwest water works estimates that its WACC is 10.60%. The company is considering the following capital budgeting projects. Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them. Which set of prajects should be accepted? Project Size $1 million 2 million 2 million 2 million 1 million 1 million 1 million Rate of Return 12.0% 11.5 11.2 11.0 10.7 10.3 10.2 Select- ccapt dont accept

Explanation / Answer

Accept the project where the rate of return is more than WACC.

In the given case A,B, C, D, E shall be accepted

F and G shall be Rejected

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