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How large should next year capital budget be

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Question - The Mitata Co. is financed exclusively using equity funding and has a cost of equity of 13.05%. It is considering the following projects for investment next year:

Project

Required Investment

Expected Rate of Return

W

$5,250

10.60%

X

$6,375

13.65%

Y

$4,575

14.10%

Z

$3,675

13.10%

Each project has average risk, and The Mitata Co. accepts any project whose expected rate of return exceeds its cost of capital. How large should next year's capital budget be?

Reference no: EM133145208

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