Answer to Question #191007 in Management for FiatPattadon

Question

Suppose FinD has five independent projects as investment opportunities with the following

costs and rates of return: (A) 17.4%; (B) 16.0%; (C) 14.2%; (D) 13.2%; and (E) 12%. Assuming

FinD does not want to issue new common stocks, which projects should FinD accept? Why?

Answer 1

Assuming FinD does not want to issue new common stocks, which projects should FinD accept? Why?

(A) 17.4%

Assuming all the investments are risk free, FinD would accept investment A, since it has an attractive and higher rate of return equivalent to the new common stocks in long term.