Business, 16.04.2020 16:24 meramera50

The management of Florida Phosphate Industries (FPI) is planning next year’s capital budget. The company’s earnings and dividends are growing at a constant rate of 8%. The expected dividend one year from now, D1, is $1; and the current stock price is $10. FPI can raise new debt at a 10% before-tax cost. FPI is at its optimal capital structure, which is 40% debt and 60% equity, and the firm’s marginal tax rate is 30%. FPI hasthe following independent, indivisible, and equally risky investment opportunities:

Project Cost ROR
A $15,000 16%
B 15,000 14
C 12,000 13
D 20,000 11

Which projects should the company pursue?

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The management of Florida Phosphate Industries (FPI) is planning next year’s capital budget. The com...

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