The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 10 percent. It will only invest $80,600 this year. It has determined the internal rate of return for each of the following projects.
| Project |
Project Size |
Internal Rate
of Return |
| A |
$ |
11,400 |
|
|
20 |
% |
| B |
|
31,400 |
|
|
22 |
|
| C |
|
26,400 |
|
|
12 |
|
| D |
|
11,400 |
|
|
14 |
|
| E |
|
11,400 |
|
|
16 |
|
| F |
|
21,400 |
|
|
19 |
|
| G |
|
16,400 |
|
|
17 |
|
|
a. Pick out the projects that the firm should accept. (You may select more than one answer)
Project E
Project D
Project F
Project A
Project B
Project C
Project G
b. If Projects A and B are mutually exclusive, which projects would you accept in spending the $80,600? (You may select more than one answer.)
Project E
Project A
Project F
Project C
Project B
Project D
Project G