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Homework answers / question archive / A firm has a capital budget of $3,000 and a WACC of 8%

A firm has a capital budget of $3,000 and a WACC of 8%

Finance

A firm has a capital budget of $3,000 and a WACC of 8%. Should the firm choose

project A : Yes or No

project B : Yes or No

project C : Yes or No

project D : Yes or No

project E : Yes or No

Project Cost NPV IRR
A $1,000 $2,000 10%
B $1,000 $1,500 13%
C $1,000 $3,000 12%
D $1,000 $2,500 14%
E $1,000 $500 15%

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We should select the projects which have higher NPV.

Here projects C,D and A have higher NPV's and the cost is 3000. Hence, those three projects have to be selected.

Projects B and E are to be rejected

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