Ask Question
BusinessBusiness
18 March, 20:58

Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects:

Project. Size. Rate of Return.

A. $1 million. 12.0%

B. 2 million. 11.5

C. 2 million. 11.2

D. 2 million. 11.0

E. 1 million. 10.7

F. 1 million. 10.3

G. 1 million. 10.2

Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all of the projects or only some of them. Which set of projects should be accepted? Explain.

+2
Answers (1)
  1. 18 March, 21:25
    0
    Projects A, B, C, D and E should be accepted

    Explanation:

    Based on the fact that each of the itemized projects has the same of level of risk as the company's existing assets, we suggest that the firm undertake those projects that gives a return rate which is above the current weighted average cost of capital of 10.5%

    In essence, projects A, B, C, D and E should be accepted as they 12%,11.5%,11.2%,11% and 10.7% returns on investment respectively.

    Projects F& G would be rejected on the premise that their rates of return are lower than what is currently obtainable in Midwest Water Works.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects: Project. Size. ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Cullumber Inc. had sales of $2,300,000 for the first quarter of 2020. In making the sales, the company incurred the following costs and expenses.
Answers (1)
Which of the following is true with regards to writing off the costs of computer and telecommunications expenses on your tax return? It's best to depreciate the items over time.
Answers (1)
You are comparing two annuities which offer quarterly payments of $2,500 for five years and pay 0.75 percent interest per month. Annuity A will pay you on the first of each month while annuity B will pay you on the last day of each month.
Answers (1)
The imitation based account's primary weakness is that
Answers (1)
Bob bought some land costing $15,390. Today, that same land is valued at $44,817. How long has Bob owned this land if the price of land has been increasing at 5 percent per year?
Answers (1)
New Questions in Business
There are plenty of products and services on the market that customers can choose from. however, customers select the business in which they purchase products based on the perceived value of the business and product.
Answers (1)
A married couple abandoned their principal residence in May. They had purchased the house five years ago for $350,000. The house had a current fair market value of $300,000.
Answers (1)
6 If you are a driver under 21 with a breath or blood alcohol level of. 05 or higher you will be required to:
Answers (1)
Why do you think companies felt that unions were "conspiracies that interfere with property rights"?
Answers (1)
When Ernesto needed to learn what his employees really think about his company's new pension plan, he approached Vonnie, a long-time secretary in the legal department with contacts throughout the organization.
Answers (1)
Home » Business » Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects: Project. Size. Rate of Return. A. $1 million. 12.0% B. 2 million. 11.5 C. 2 million. 11.2 D. 2 million. 11.0 E. 1 million. 10.
Sign Up Forgot Password?