Investments
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A firm's current investment opportunity schedule and the weighted marginal cost of capital schedule are shown below:
Investment Opportunity IRR Initial Investment
Schedule
A 15% $200,000
B 12 300,000
C 19 100,000
D 10 400,000
E 16 300,000
Weighted Marginal Cost of Capital
Range of total new financing WMCC
$0-$250,000 7.5%
$251,000- 500,000 8.9
500,001- 1,000,000 10.0
1,000,001- 1,500,000 12.0
The investment opportunities which should be selected are:
A. B, C, D and E
B. A, B, C and D
C. A, B, D and E
D. A, B, C and E.
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The solution discusses the firm's current investment opportunity schedule and the weighted marginal cost of capital schedule.
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