Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project Investment Return Risk A $4 million 14.50% High B 5 million 12.00 High C 3 million 10.00 Low D 2 million 9.00 Average E 6 million 13.00 High F 5 million 13.00 Average G 6 million H 3 million 7.00 11.75 Low Low Ziege's WACC is 10.50%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects. a. Which projects should Ziege accept if it faces no capital constraints? Project A -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- ✓ Project G -Select- Project H -Select- b. If Ziege can only invest a total of $13 million, which projects should it accept? Project A -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- Project G Project H -Select- -Select- 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- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- Project G -Select- Project H -Select- 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
Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project Investment Return Risk A $4 million 14.50% High B 5 million 12.00 High C 3 million 10.00 Low D 2 million 9.00 Average E 6 million 13.00 High F 5 million 13.00 Average G 6 million H 3 million 7.00 11.75 Low Low Ziege's WACC is 10.50%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects. a. Which projects should Ziege accept if it faces no capital constraints? Project A -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- ✓ Project G -Select- Project H -Select- b. If Ziege can only invest a total of $13 million, which projects should it accept? Project A -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- Project G Project H -Select- -Select- 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- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- Project G -Select- Project H -Select- 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
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Ziege Systems is considering the following independent projects for the coming year:
Required
Rate of
Project
Investment
Return
Risk
A
$4 million
14.50%
High
B
5 million
12.00
High
C
3 million
10.00
Low
D
2 million
9.00
Average
E
6 million
13.00
High
F
5 million
13.00
Average
G
6 million
H
3 million
7.00
11.75
Low
Low
Ziege's WACC is 10.50%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects.
a. Which projects should Ziege accept if it faces no capital constraints?
Project A
-Select-
Project B
-Select-
Project C
-Select-
Project D
-Select-
Project E
-Select-
Project F
-Select- ✓
Project G
-Select-
Project H
-Select-
b. If Ziege can only invest a total of $13 million, which projects should it accept?
Project A
-Select-
Project B
-Select-
Project C
-Select-
Project D
-Select-
Project E
-Select-
Project F
-Select-
Project G
Project H
-Select-
-Select-
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-
Project B
-Select-
Project C
-Select-
Project D
-Select-
Project E
-Select-
Project F
-Select-
Project G
-Select-
Project H
-Select-
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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