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Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project A Investment Return Risk $4 million 11.75% High B 5 million 14.25 High с 3 million 9.75 Low D 2 million 9.25 Average E 6 million 12.75 High F 5 million 12.75 Average G H 6 million 3 million 7.25 11.25 Low Low Ziege's WACC is 10.25%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects. a. Which projects should Ziege accept if it faces no capital constraints? Project A Project B -Select- -Select- ▼ Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ b. If Ziege can only invest a total of $13 million, which projects should it accept? Project A -Select- Project B -Select- Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ If Ziege can only invest a total of $13 million, what would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million c. Suppose Ziege can raise additional funds beyond the $13 million, but each new increment (or partial increment) of $5 million of new capital will cause the WACC to Increase by 1%. Assuming that Ziege uses the same method of risk adjustment, which projects should it now accept? Project A -Select- Project B -Select- ✔ Project C -Select- Project D -Select- v Project E -Select- v Project F -Select- v Project G -Select- v Project H -Select- ✔ What would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million

Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project A Investment Return Risk $4 million 11.75% High B 5 million 14.25 High с 3 million 9.75 Low D 2 million 9.25 Average E 6 million 12.75 High F 5 million 12.75 Average G H 6 million 3 million 7.25 11.25 Low Low Ziege's WACC is 10.25%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects. a. Which projects should Ziege accept if it faces no capital constraints? Project A Project B -Select- -Select- ▼ Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ b. If Ziege can only invest a total of $13 million, which projects should it accept? Project A -Select- Project B -Select- Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ If Ziege can only invest a total of $13 million, what would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million c. Suppose Ziege can raise additional funds beyond the $13 million, but each new increment (or partial increment) of $5 million of new capital will cause the WACC to Increase by 1%. Assuming that Ziege uses the same method of risk adjustment, which projects should it now accept? Project A -Select- Project B -Select- ✔ Project C -Select- Project D -Select- v Project E -Select- v Project F -Select- v Project G -Select- v Project H -Select- ✔ What would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
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Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project A Investment Return Risk $4 million 11.75% High B 5 million 14.25 High с 3 million 9.75 Low D 2 million 9.25 Average E 6 million 12.75 High F 5 million 12.75 Average G H 6 million 3 million 7.25 11.25 Low Low Ziege's WACC is 10.25%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects. a. Which projects should Ziege accept if it faces no capital constraints? Project A Project B -Select- -Select- ▼ Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ b. If Ziege can only invest a total of $13 million, which projects should it accept? Project A -Select- Project B -Select- Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ If Ziege can only invest a total of $13 million, what would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million c. Suppose Ziege can raise additional funds beyond the $13 million, but each new increment (or partial increment) of $5 million of new capital will cause the WACC to Increase by 1%. Assuming that Ziege uses the same method of risk adjustment, which projects should it now accept? Project A -Select- Project B -Select- ✔ Project C -Select- Project D -Select- v Project E -Select- v Project F -Select- v Project G -Select- v Project H -Select- ✔ What would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million
Transcribed Image Text:Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project A Investment Return Risk $4 million 11.75% High B 5 million 14.25 High с 3 million 9.75 Low D 2 million 9.25 Average E 6 million 12.75 High F 5 million 12.75 Average G H 6 million 3 million 7.25 11.25 Low Low Ziege's WACC is 10.25%, but it adjusts for risk by adding 2% to the WACC for high-risk projects and subtracting 2% for low-risk projects. a. Which projects should Ziege accept if it faces no capital constraints? Project A Project B -Select- -Select- ▼ Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ b. If Ziege can only invest a total of $13 million, which projects should it accept? Project A -Select- Project B -Select- Project C -Select- v Project D -Select- v Project E -Select- v Project F -Select- v Project G Project H -Select- ✔ -Select- ▼ If Ziege can only invest a total of $13 million, what would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million c. Suppose Ziege can raise additional funds beyond the $13 million, but each new increment (or partial increment) of $5 million of new capital will cause the WACC to Increase by 1%. Assuming that Ziege uses the same method of risk adjustment, which projects should it now accept? Project A -Select- Project B -Select- ✔ Project C -Select- Project D -Select- v Project E -Select- v Project F -Select- v Project G -Select- v Project H -Select- ✔ What would be the dollar size of its capital budget? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million
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