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Project cost irr type of capital proportion

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Reference no: EM132200067

Been working on this problem for awhile and am really struggling. Any help would be greatly appreciated.

Marvelous Manufacturing (MM) generated the following information for its capital budgeting manager:

Capital Structure

Project Cost IRR Type of Capital Proportion

W $65,000 15% Debt 30%

X 70,000 13 Common equity 70

Y 75,000 12

Z 70,000 11

MM's weighted average cost of capital (WACC) is 12 percent if the firm does not have to issue new common equity; if new common equity is needed, its WACC is 16 percent. If MM expects to generate $70,000 in retained earnings this year, which project(s) should be purchased? Assume that the projects are independent and indivisible.

  • Only Project W should be purchased.
  • Projects W and X should be purchased.
  • Projects W, X, and Y should be purchased.
  • All of the projects should be purchased.
  • None of the projects should be purchased.

Reference no: EM132200067

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