The managers of JJ’s Enterprises are trying to determine the company’s optimal capital budget
June 8th, 2024
The managers of JJ’s Enterprises are trying to determine the company’s optimal capital budget for the upcoming year. JJ’s is considering the following projects: The company estimates that its WACC is 11 percent. All projects are independent. The company adjusts for risk by adding 2 percentage points to the WACC for high-risk projects and subtracting 2 percentage points from the WACC for low-risk projects. Which of the projects will the company accept?Project Size Rate of Return RiskA $200,000 16% HighB $500,000 14% AverageC $400,000 12% LowD $300,000 11% HighE $100,000 10% AverageF $200,000 10% LowG $400,000 7% LowPlease include work and formulas because I do not know how to arrive at the answers.