Question

Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate of Return Risk A $4 million 14.25% High B 5 million 11.75 High C 3 million 9.75 Low D 2 million 8.75 Average E 6 million 12.75 High F 5 million 12.75 Average G 6 million 6.75 Low H 3 million 12.25 Low Ziege's WACC is 10.25%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects. Which projects should Ziege accept if it faces no capital constraints? Project A Project B Project C Project D Project E Project F Project G Project H If Ziege can only invest a total of $13 million, which projects should it accept? Project A Project B Project C Project D Project E Project F Project G Project H If Ziege can only invest a total of $13 million, what would be the dollar size of its capital budget? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. $ million Suppose Ziege can raise additional funds beyond the $13 million, but each new increment (or partial increment) of $5 million of new capital will cause the WACC to increase by 1%. Assuming that Ziege uses the same method of risk adjustment, which projects should it now accept? Project A Project B Project C Project D Project E Project F Project G Project H What would be the dollar size of its capital budget? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. $ million

Answer 1