Wren Manufacturing is in the process of analyzing its investment decision-making procedures. The two projects evaluated by the firm during the past month were projects 263 and 264. The basic variables surrounding each project's analysis, using IRR decision technique, and the resulting decision actions are summarized in the attached table.
a) evaluate the firm's decision-making procedures and explain why the acceptance of project 263 and the rejection of project 264 may not be in the best interest of the owner.
b) if the firm maintains a capital structure containing 40% debt and 60% equity, find its weighted average cost using the data in the attached file.
c) if the firm had to use the weighted average cost calculated in part b, what actions would have been indicated relative to projects 263 and 264.
d) compare and contrast the firm's actions with your findings in part c. What decision method seems more appropriate? Explain why?© BrainMass Inc. brainmass.com July 19, 2018, 12:23 am ad1c9bdddf
a) evaluate the firm's decision-maing procedures and explain whhy the acceptance of project 263 and the rejection of project 264 may not be in the best interest of the owner.
The firm is making decision based on the cost of financing for each specific project. This is not correct since the weighted average cost of capital should be used. Accepting Project 263 will only give a ...
The solution explains the decision making in project acceptance and rejection. It also explains the calculation of WACC, NPV and IRR