Question

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 25% equity financing that has a cost of equity capital of 13% and 75% debt financing with a cost of debt capital of 24%, a) what is the MARR and which projects are profitable for company? b) if company's budget is $1.2 million, which projects should the company undertake? c) what is the opportunity cost of their decision? 1. Project R08% per year 35 29.8 25.2 21.8 19.4 13.1 8.2 | project Inventory Technology Warehouse Maintenance Products Energy Shipping Required budget ($1000) 800 500 600 300 200 350

Answer 1