Differences in scale are invested at the cost of capital

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Reference no: EM131245255

The Johnson Company is considering the following mutually exclusive projects:

2067_Table 8.jpg

The cost of capital used by the Johnson Company is 16%.
a) How should the fact that the projects have differences in scale be taken into consideration?

b) Rank the projects, assuming that they can be repeated with constant scale replication, and that the differences in scale are invested at the cost of capital.

Reference no: EM131245255

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