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Process of capital rationing in its decision making

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Reference no: EM131318313

The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 10 percent. It will only invest $77,000 this year. It has determined the internal rate of return for each of the following projects.

Project

Project Size

Internal Rate of Return

A..................... 

$10,500

21%

B..................... 

30,500

22

C..................... 

25,500

18

D..................... 

10,500

13

E..................... 

10,500

20

F...................... 

20,500

11

G..................... 

10,500

16

a. Select the projects that the firm should accept.

b. If Projects A and B are mutually exclusive, how would that affect your overall answer? That is, which projects would you accept in spending the $77,000?

Reference no: EM131318313

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