Suppose that Ace could obtain only $ 12,000,000 of debt at the cost of debt percentage found in 3a, with any additional debt costing 10% before taxes....

E

15,000,000

6

11.5%

Response:

d.    What is the WACC that should be used by the firm to optimize its capital budgeting decisions. Explain why.

Response:

e.    Which projects should the company accept based on the IRR's? What is the company's optimal capital budget?

Response:

Question 11

Should the corporate cost of capital as developed above be used for all projects? If not, what type of adjustment should be made?

Response: