What project should PT Neoland accept

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Reference no: EM133081503

Question - PT Neoland, a company that has a weighted average cost of capital of 10%, is sorting out independent project schemes that may be undertaken next year as follows:

Proyek

Required Investment (juta)

Rate of Return

Risk

A

5

7%

Low

B

6

11%

Low

C

7

9.5%

Low

D

4

14%

High

E

2

12.5%

High

F

4

9%

Moderate

G

4

11.5%

Moderate

H

3

12%

High

To anticipate risks that may arise unexpectedly, PT Neoland decided to increase 3% WACC for projects with a high risk level, and reduce 1% WACC for projects with a low risk level.

Required - Based on this information, determine:

a. What project should PT Neoland accept if there is no capital limit?

b. If PT Neoland can only budget an investment with an upper limit of IDR 10,000,000, which project should PT Neoland take? Explain your argument in choosing the project!

Reference no: EM133081503

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