Managers from different departments in Bensen Systems, a large multinational corporation, have offered seven projects for consideration by the corporate office. A staff member for the chief financial officer used key words to identify the projects and then listed them in order of projected rate of return as shown below. If the company wants to grow rapidly through high leverage and uses only 5% equity financing that has a cost of equity capital of 10% and 95% debt financing with a cost of debt capital of 19%, which projects should the company undertake? Project ID Projected ROR, % per year Inventory 30.0 Technology 28.4 Warehouse 21.9 Maintenance 19.5 Products 13.1 Energy 9.6 Shipping 8.2
Managers from different departments in Bensen
Systems, a large multinational corporation, have offered
seven projects for consideration by the corporate
office. A staff member for the chief financial
officer used key words to identify the projects and
then listed them in order of projected
as shown below. If the company wants to grow rapidly
through high leverage and uses only 5% equity
financing that has a
95% debt financing with a cost of debt capital of
19%, which projects should the company undertake?
Project ID Projected ROR, % per year
Inventory 30.0
Technology 28.4
Warehouse 21.9
Maintenance 19.5
Products 13.1
Energy 9.6
Shipping 8.2
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
