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Company optimal capital budget for the upcoming year

Problem: Managers are trying to determine the company's optimal capital budget for the upcoming year. The company is considering the following projects:

Project Size Rate of Return Risk

A $ 200,000 16% High

B 500,000 14 Average

C 400,000 12 Low

D 300,000 11 High

E 100,000 10 Average

F 200,000 10 Low

G 400,000 7 Low

The company estimates that its WACC is 11 percent. All projects are independent. The company adjusts for risk by adding 2 percentage points to the WACC for high-risk projects and subtracting 2 percentage points from the WACC for low-risk projects. Which of the projects will the company accept?

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