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Project Selection: Midwest Water

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Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects:
Project Size Rate of Return
A $1 million 12%
B 2 million 11.5%
C 2 million 11.2%
D 2 million 11%
E 1 million 10.7%
F 1 million 10.3%
G 1 million 10.2%

Assume that each of these projects is just as risky as the firm's existing assets, and the firm may accept all the projects or only some of them. Which set of projects should be accepted?

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Any project that has a return greater than 10.5% should be selected - since that ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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