Ziege Systems is considering the following independent projects for the coming year: Project A Required Investment Rate of Return Risk $4 million 13.25% High BCDEFGH 5 million 10.75 High 3 million 8.75 Low 2 million 8.50 Average 6 million 11.75 5 million 11.75 High Average 6 million 6.50 Н 3 million 10.50 Low Low 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 c. 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- ✰ -Select- ◇ -Select- -Select- ✰ Project B Project C Project D Project E -Select- ✰ Project F -Select- ◊ Project G -Select- ◊ -Select- ✰ Project H 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

Cornerstones of Cost Management (Cornerstones Series)
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Author:Don R. Hansen, Maryanne M. Mowen
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Chapter19: Capital Investment
Section: Chapter Questions
Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...
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Ziege Systems is considering the following independent projects for the coming year:
Project
A
Required
Investment
Rate of
Return
Risk
$4 million
13.25%
High
BCDEFGH
5 million
10.75
High
3 million
8.75
Low
2 million
8.50
Average
6 million
11.75
5 million
11.75
High
Average
6 million
6.50
Н
3 million
10.50
Low
Low
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
c. 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- ✰
-Select- ◇
-Select-
-Select- ✰
Project B
Project C
Project D
Project E
-Select- ✰
Project F
-Select- ◊
Project G
-Select- ◊
-Select- ✰
Project H
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
Transcribed Image Text:Ziege Systems is considering the following independent projects for the coming year: Project A Required Investment Rate of Return Risk $4 million 13.25% High BCDEFGH 5 million 10.75 High 3 million 8.75 Low 2 million 8.50 Average 6 million 11.75 5 million 11.75 High Average 6 million 6.50 Н 3 million 10.50 Low Low 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 c. 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- ✰ -Select- ◇ -Select- -Select- ✰ Project B Project C Project D Project E -Select- ✰ Project F -Select- ◊ Project G -Select- ◊ -Select- ✰ Project H 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
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