A Major Forest Products Company with a Cost of Capital

question 15

Multiple Choice

A major forest products company with a cost of capital of 12% has raised $15 million in financing and is considering three projects that are divisible, are not mutually exclusive and will have no residual value at the end of their 10 year term. Project A will cost a company $12 million providing $2.45 million in annual income before depreciation. Project B, costing $10.8 million, has annual projected savings before depreciation of $1.8 million. Project C costs $7.3 million and will bring in $1.7 million annually before depreciation. Assuming markets operate in the theoretical Modernist manner, if the company expects to earn a 12% return on their investments, in which project(s) should the company invest?

• A) All three projects.
• B) All of C and 60% of A
• C) B only
• D) All of A and all of C
• E) All of B and 84% of C

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Definitions:

Female Negotiators

Women who engage in the process of negotiation, potentially facing unique challenges and employing distinct strategies in comparison to their male counterparts.

Performance

Refers to the execution or accomplishment of a task in accordance with established standards or criteria.

Powerful Frame

A dominant perspective or viewpoint that significantly influences understanding or decision-making.

Higher Outcomes

Results or achievements that surpass expected standards, goals, or benchmarks.