The use of the overall firm’s weighted average cost of capital (WACC or RWACC) in discounting...

The use of the overall firm’s weighted average cost of capital (WACC or R_WACC) in discounting projects of different risk levels results in the _______________________.
A) rejection of too many high-risk projects
B) acceptance of too many low-risk projects
C) acceptance of too many high-risk projects and rejection of too many low-risk projects
D) acceptance of too many low-risk projects and rejection of too many high-risk projects

Solutions

Expert Solution

correct answer is option - C) ) acceptance of too many high-risk projects and rejection of too many low-risk projects

if the firm do not adjust the WACC with the adjusted risk it will start acceptancing too many high-risk projects and rejecting too many low-risk projects

jeff jeffy answered 1 year ago

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