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OPTIMAL CAPITAL BUDGET Hampton Manufacturing estimates that its WACC is 12 5%. The company is considering the following seven investment projects:
a. Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted, and what is the firm's optimal capital budget?
b. Now assume that Projects C and D are mutually exclusive. Project D has an NPV of $400,000, whereas Project C has an NPV of $350,000. Which set of projects should be accepted, and what is the firm's optimal capital budget?
c. Ignore Part b and assume that each of the projects is independent but that management decides to incorporate project risk differentials. Management judges Projects B, C, D, and E to have average risk; Project A to have high risk; and Projects F and G to have low risk. The company adds 2% to the WACC of those projects that are significantly more risky than average, and it subtracts 2% from the WACC of those projects that are substantially less risky than average. Which set of projects should be accepted, and what is the firm's optimal capital budget?
How does the AICPA Code of Professional Conduct relate to ethics? Provide examples to support your response.
1.During 2011 (its first year of operations) and 2012, Batali Foods used the FIFO inventory costing method for both financial reporting and tax purposes.
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