# Ziege Systems is considering the following independent projects for the coming year: Project …

Ziege Systems is considering the following independent projects
for the coming year:

 Project Required Investment Rate of Return Risk A \$4 million 12.25% High B 5 million 14.75 High C 3 million 10.25 Low D 2 million 10.25 Average E 6 million 13.25 High F 5 million 13.25 Average G 6 million 8.25 Low H 3 million 12.75 Low

Ziege's WACC is 10.75%, but it adjusts for risk by adding 2% to
the WACC for high-risk projects and subtracting 2% for low-risk
projects.

1. Which projects should Ziege accept if it faces no capital
constraints?

 Project A -Select-AcceptRejectItem 1 Project B -Select-AcceptRejectItem 2 Project C -Select-AcceptRejectItem 3 Project D -Select-AcceptRejectItem 4 Project E -Select-AcceptRejectItem 5 Project F -Select-AcceptRejectItem 6 Project G -Select-AcceptRejectItem 7 Project H -Select-AcceptRejectItem 8
2. If Ziege can only invest a total of \$13 million, which projects
should it accept?

 Project A -Select-AcceptRejectItem 9 Project B -Select-AcceptRejectItem 10 Project C -Select-AcceptRejectItem 11 Project D -Select-AcceptRejectItem 12 Project E -Select-AcceptRejectItem 13 Project F -Select-AcceptRejectItem 14 Project G -Select-AcceptRejectItem 15 Project H -Select-AcceptRejectItem 16

If Ziege can only invest a total of \$13 million, what would be
the dollar size of its capital budget? Round your answer to two
answer of \$10,550,000 should be entered as 10.55.

\$    million

3. Suppose Ziege can raise additional funds beyond the \$13 million,
but each new increment (or partial increment) of \$5 million of new
capital will cause the WACC to increase by 1%. Assuming that Ziege
uses the same method of risk adjustment, which projects should it
now accept?

 Project A -Select-AcceptRejectItem 18 Project B -Select-AcceptRejectItem 19 Project C -Select-AcceptRejectItem 20 Project D -Select-AcceptRejectItem 21 Project E -Select-AcceptRejectItem 22 Project F -Select-AcceptRejectItem 23 Project G -Select-AcceptRejectItem 24 Project H -Select-AcceptRejectItem 25

What would be the dollar size of its capital budget? Round your