Marginal cost and marginal revenue, Finance Basics

Use the concepts of marginal cost and marginal revenue to derive an optimal capital budget for Company X, which has identified 7 possible investment projects and determined its cost of capital as shown below.

Table A: Alternative Projects, Required Investments, and Expected Rate of Return

Project

Investment Required in Millions of Dollars

Expected Rate of Return on Investment

A

150

12%

B

300

15%

C

125

10%

D

75

16%

E

50

20%

F

500

14%

G

250

18%

 Table B: Cost of Capital by Amount Raised

Block of Funds
 (in Millions)

Amount of Funds
in Block

Cost of Capital for Block

First Block of Funds

$500

10%

Second Block of Funds

$400

11%

Third Block of Funds

$300

12%

Fourth Block of Funds

$200

13%

Fifth Block of Funds

$100

14%

Sixth Block of Funds

$100

15%

Posted Date: 4/1/2013 5:21:47 AM | Location : United States







Related Discussions:- Marginal cost and marginal revenue, Assignment Help, Ask Question on Marginal cost and marginal revenue, Get Answer, Expert's Help, Marginal cost and marginal revenue Discussions

Write discussion on Marginal cost and marginal revenue
Your posts are moderated
Related Questions
Valuation of Business A business may be valued for different type of reasons that as for merger, acquisition, or takeover or liquidation or outright sale.  During purchasing a

Blue Chips and Going Short or Long on Share - Stock Market Blue Chips Are first class securities of firms that have sound share capital and are internationally

Asset Based Valuation  This method acquires into account the entire business along with reference to its assets and then divides the resultant value via the number of shares i

(i) Find out operating leverage from the following data: Sales                             Rs.50000 Variable Cost               60% Fixed Cost                   Rs.12000

how can debentures be explained in class in term of game, role play etc....?


Define Meaning of Investment Meaning of Investment: Investment involves making of a sacrifice in the present with hope of deriving future advantages. Investment has many

Ask quQUESTION 1 1. In the ratio test used to determine whether a qualified plan is nondiscriminatory, what is the minimum percentage of nonhighly compensated employees who must be

Acceptance Rule of Accounting Rate of Return or ARR ARR procedure will accept those projects whose ARR is higher rather than that set with management or with bank rate and it

The average of the industry current ratio was 1.86 for 2004, 0.86 for 2005, and 0.87 for 2006. Lenovo had higher current ratio than the industry average in 2004. At that time, thei