Question

The Cooper Electronics Company has developed the following schedule of potential investment projects that may be undertaken during the next six months:

Project Cost (in Millions of Dollars) Expected Rate of Return
A $3.0 20%
B 1.5 22
C 7.0 7
D 14.0 10
E 50.0 12
F 12.0 9
G 1.0 44

If Cooper requires a minimum rate of return of 10 percent on all investments, which projects should be adopted?

Answer 1

The Cooper Electronics Company should adopt projects A, B, D, E, and G, which have expected rates of return greater than or equal to 10%. Projects C and F do not meet the minimum required rate and should not be adopted.

Projects C and F should not be adopted.

Step-by-step explanation:

The Cooper Electronics Company should adopt the investment projects that have an expected rate of return greater than or equal to their minimum required rate of return of 10 percent. Based on the information provided, the projects that meet or exceed this threshold are:

Project A with a rate of return of 20%

Project B with a rate of return of 22%

Project D with a rate of return of 10%

Project E with a rate of return of 12%

Project G with a rate of return of 44%

Projects C and F should not be adopted, as their expected rates of return of 7% and 9% respectively, are below Cooper's minimum requirement.