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 $66,400 this year. It has determined the internal rate of return for each of the following projects. Project Project Size Internal Rate of Return
A $ 11,600 22 %
B 16,600 16
C 26,600 18
D 11,600 20
E 11,600 11
F 21,600 13
G 16,600 21
a. Pick out the projects that the firm should accept. (You may select more than one answer.
Project B
Project F
Project D
Project G
Project A
Project E
Project C
b. If Projects A and G are mutually exclusive, which projects would you accept in spending the $66,400? (You may select more than one answer.
Project B
Project E
Project D
Project F
Project A
Project G
Project C