What is the firms optimal capital budget

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Reference no: EM13196282 , Length: 10

The managers of United Medtronic are evaluating the following four projects for the coming budget period. The firms corporate cost of capital is 14 percent.

Project----Cost---------IRR

A----------$15,000----17%

B----------15,000------16

C-----------12,000-----15

D------------20,000-----13

a. What is the firm's optimal capital budget?

b. Now, suppose Medtronics managers want to consider differential risk in the capital budgeting process. Project A has average risk, B has below average risk, C has above average risk and D has avaerage risk. What is the firms optimal capital budget when differential risk is considered?

Reference no: EM13196282

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