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
Agency Theory An agency relationship arises whether one or more parties identified the principal contracts or hires another identified an agent to perform on his behalf some

Earnings Method or Earning Basis Valuation By using the earning valuation method, a company will employ its P/E ratio to value its shares. P/E    =  MV/E MV    =   E x P

1. Suppose company A expects to increase unit sales of i-phone by 15% per year for the next 5 years. If you currently sell 3 million i-phones in one year, how many phones do you ex

Explain the term - Underwriting Underwriting is an agreement whereby underwriter promises to subscribe to a specified number of debentures or shares or a specified amount of

Dividend Ratios 1. Dividend per shares (DPS) = Earnings to ordinary shareholders/ Number of ordinary shares Specify cash returns received for all share holders. 2. Di

Valuation of Securities The previous methods were perfect for valuing the entire business however it is also essential to ascertain the value of part of a business namely shar

1.  A company is trying to decide which one of two projects it should accept. Both projects have similar start-up costs. Project 1 will generate annual cash flows of $52,000 a year

Attached is the file for your bond problem. Your group must use the following for the bond problem. In addition, using the general ledger software as described in the project i


Volpe Corporation produces class rings to sell to college and high school students. These rings sell for $75 each, and cost $30 each to produce. Volpe Corporation has fixed costs o