Create an IOS chart with the following investment alternatives: Alternative
A has an IRR of 8% and will add $10 million to the capital structure, while alternative
B adds $12 million but returns 6.5%.
C brings in 9.3% while costing $4 million, while
D brings in 12% on $13.35 million. Finally, alternative investment E yields an IRR of 11.7% on $4 million in capital.
The WACC is 7.75% with break points at $13 million and a new WACC of 8.12%. A final breakpoint occurs at $25 million boosting the WACC to 9.25%.
Your banker has told you that beyond $25 million you will not be extended additional credit.