Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A's projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept?
A. A Division B project with a 13% return.
B. A Division B project with a 12% return.
C. A Division A project with an 11% return.
D. A Division A project with a 9% return.
E. A Division B project with an 11% return.
Answer: C
You might also like to view...
When companies set prices, the government and social concerns are ________ factors affecting pricing decisions
A) external B) internal C) economic D) cultural E) organizational
Many health insurance policies require patients to call and get preapproval for tests or procedures. The health insurance company acts as a(n) ________ for the purchase of these medical services.
A. decider B. influencer C. gatekeeper D. initiator E. user
What do accountants commonly do when the connection between an expense and the corresponding revenue is vague?
A. Match the expense with the period in which it is incurred. B. Recognize the expense at the time payment is made. C. Delay expense recognition until it can be matched with revenue. D. Accelerate revenue recognition and delay expense recognition.
Manufacturers are required to report on any products intended for sale if the products have proved to be hazardous
a. True b. False Indicate whether the statement is true or false