Question

In: Finance

eBook Ziege Systems is considering the following independent projects for the coming year: Project Required Investment...

eBook

Ziege Systems is considering the following independent projects for the coming year:


Project
Required
Investment
Rate of
Return

Risk
A $4 million 10.75% High
B 5 million 13.25 High
C 3 million 8.75 Low
D 2 million 7.75 Average
E 6 million 11.75 High
F 5 million 11.75 Average
G 6 million 5.75 Low
H 3 million 10.50 Low

Ziege's WACC is 9.25%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects.

  1. Which projects should Ziege accept if it faces no capital constraints?

    Project A -Select-AcceptRejectItem 1
    Project B -Select-AcceptRejectItem 2
    Project C -Select-AcceptRejectItem 3
    Project D -Select-AcceptRejectItem 4
    Project E -Select-AcceptRejectItem 5
    Project F -Select-AcceptRejectItem 6
    Project G -Select-AcceptRejectItem 7
    Project H -Select-AcceptRejectItem 8
  2. If Ziege can only invest a total of $13 million, which projects should it accept?

    Project A -Select-AcceptRejectItem 9
    Project B -Select-AcceptRejectItem 10
    Project C -Select-AcceptRejectItem 11
    Project D -Select-AcceptRejectItem 12
    Project E -Select-AcceptRejectItem 13
    Project F -Select-AcceptRejectItem 14
    Project G -Select-AcceptRejectItem 15
    Project H -Select-AcceptRejectItem 16

    If Ziege can only invest a total of $13 million, what would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places.

    $    million

  3. 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 -Select-AcceptRejectItem 18
    Project B -Select-AcceptRejectItem 19
    Project C -Select-AcceptRejectItem 20
    Project D -Select-AcceptRejectItem 21
    Project E -Select-AcceptRejectItem 22
    Project F -Select-AcceptRejectItem 23
    Project G -Select-AcceptRejectItem 24
    Project H -Select-AcceptRejectItem 25

    What would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places.

    $    million

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE


Related Solutions

Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate of Return Risk A $4 million 13.25% High B 5 million 10.75 High C 3 million 8.75 Low D 2 million 8.00 Average E 6 million 11.75 High F 5 million 11.75 Average G 6 million 6.00 Low H 3 million 10.50 Low Ziege's WACC is 9.25%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2%...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate of Return Risk A $4 million 14.75% High B 5 million 12.25 High C 3 million 10.25 Low D 2 million 9.50 Average E 6 million 13.25 High F 5 million 13.25 Average G 6 million 7.50 Low H 3 million 12.75 Low Ziege's WACC is 10.75%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2%...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate of Return Risk A $4 million 12.50% High B 5 million 15.00 High C 3 million 10.50 Low D 2 million 9.50 Average E 6 million 13.50 High F 5 million 13.50 Average G 6 million 7.50 Low H 3 million 12.00 Low Ziege's WACC is 11.00%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2%...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate of Return Risk A $4 million 11.25% High B 5 million 13.75 High C 3 million 9.25 Low D 2 million 9 Average E 6 million 12.25 High F 5 million 12.25 Average G 6 million 7 Low H 3 million 11 Low Ziege's WACC is 9.75%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2%...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate of Return Risk A $4 million 11.50% High B 5 million 14.00 High C 3 million 9.50 Low D 2 million 9.25 Average E 6 million 12.50 High F 5 million 12.50 Average G 6 million 7.25 Low H 3 million 11.50 Low Ziege's WACC is 10.00%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2%...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate of Return Risk A $4 million 12.25% High B 5 million 14.75 High C 3 million 10.25 Low D 2 million 9.75 Average E 6 million 13.25 High F 5 million 13.25 Average G 6 million 7.75 Low H 3 million 12.00 Low Ziege's WACC is 10.75%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2%...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
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 9.75 Average E 6 million 12.75 High F 5 million 12.75 Average G 6 million 7.75 Low H 3 million 11.25 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%...
Ziege Systems is considering the following independent projects for the coming year: Project Required Investment Rate...
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%...
Required information For four independent projects, the investment limit is $350, and the following project selection...
Required information For four independent projects, the investment limit is $350, and the following project selection restriction applies: project 2 can be selected only if project 3 is selected. Project Initial Investment, $ 1 250 2 150 3 75 4 235 1) Determine all the acceptable mutually exclusive bundles from the following. 2) Determine all the nonacceptable mutually exclusive bundles from the following.
GeoGrocers is considering the following independent, average-risk investment projects: Project Size of Project Project IRR Project...
GeoGrocers is considering the following independent, average-risk investment projects: Project Size of Project Project IRR Project A $1.0 million 12.0% Project B 1.2 million 11.5% Project C 1.2 million 11.0% Project D 1.2 million 10.5% Project E 1.0 million 10.0% The company has a target capital structure that consists of 50 percent debt and 50 percent equity. Its after-tax cost of debt is 8 percent, its cost of equity is estimated to be 13.5 percent, and its net income is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT