AN ANALYST GATHERED THE FOLLOWING INFORMATION ABOUT A COMPANY THAT...

20. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014 20. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014
MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014

20.

An analyst gathered the following information about a company that expects to fund its capital budget without issuing any additional shares of common stock Marginal Source of Capital Capital Structure Proportion After-Tax Cost Long-term debt 50% 6% Preferred stock 10% 10% Common equity 40% 15% 399388 If no significant size or timing differences exist among the project(s) and both projects have the same risk as the company's existing projects, which project(s) should be accepted? IRR of Two Independent Projects Warehouse project 8% Equipment project 12% A. Both projects B. The equipment project only C. The warehouse project only