Vang Enterprises,which is debt-free and finances only with equity from retained earnings,is considering 7 equal-sized capital budgeting projects.Its CFO hired you to assist in deciding whether none,some,or all of the projects should be accepted.You have the following information: rRF = 4.50%; RPM = 5.50%; and b = 0.92.The company adds or subtracts a specified percentage to the corporate WACC when it evaluates projects that have above- or below-average risk.Data on the 7 projects are shown below.If these are the only projects under consideration,how large should the capital budget be?
A) $100
B) $ 75
C) $ 50
D) $ 25
E) $ 0
Correct Answer:
Verified
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