Question
In: Finance
A firm estimates that its average-risk projects have a WACC of 10%, its below-average risk projects...
A firm estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 9%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?
A:Project B is of below-average risk and has a return of 9.5%.
B:Project C is of above-average risk and has a return of 11.5%.
C:Project A is of average risk and has a return of 9%.
D:None of the projects should be accepted.
Solutions
Expert Solution
Option A is correct
Project B is of below-average risk and has a return of 9.5%
Project B is below average risk project and WACC of below average project is 9%,
Here,
Rate of Return of Project B is 9.5% which is greater than 9% so it should be accepted
jeff jeffy answered 2 years agoRelated Solutions
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