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Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project Investment Return Risk A $4 million 14.50% High B 5 million 12.00 High C 3 million 10.00 Low D 2 million 9.00 Average E 6 million 13.00 High F 5 million 13.00 Average G 6 million H 3 million 7.00 11.75 Low Low Ziege's WACC is 10.50%, 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 -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- ✓ Project G -Select- Project H -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- Project D -Select- Project E -Select- Project F -Select- 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- Project E -Select- Project F -Select- Project G -Select- 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 Investment Return Risk A $4 million 14.50% High B 5 million 12.00 High C 3 million 10.00 Low D 2 million 9.00 Average E 6 million 13.00 High F 5 million 13.00 Average G 6 million H 3 million 7.00 11.75 Low Low Ziege's WACC is 10.50%, 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 -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- ✓ Project G -Select- Project H -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- Project D -Select- Project E -Select- Project F -Select- 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- Project E -Select- Project F -Select- Project G -Select- 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

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...
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Ziege Systems is considering the following independent projects for the coming year: Required Rate of Project Investment Return Risk A $4 million 14.50% High B 5 million 12.00 High C 3 million 10.00 Low D 2 million 9.00 Average E 6 million 13.00 High F 5 million 13.00 Average G 6 million H 3 million 7.00 11.75 Low Low Ziege's WACC is 10.50%, 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 -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- ✓ Project G -Select- Project H -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- Project D -Select- Project E -Select- Project F -Select- 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- Project E -Select- Project F -Select- Project G -Select- 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 Investment Return Risk A $4 million 14.50% High B 5 million 12.00 High C 3 million 10.00 Low D 2 million 9.00 Average E 6 million 13.00 High F 5 million 13.00 Average G 6 million H 3 million 7.00 11.75 Low Low Ziege's WACC is 10.50%, 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 -Select- Project B -Select- Project C -Select- Project D -Select- Project E -Select- Project F -Select- ✓ Project G -Select- Project H -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- Project D -Select- Project E -Select- Project F -Select- 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- Project E -Select- Project F -Select- Project G -Select- 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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