A company estimates that an average-risk project has a WACC of 10 percent, a below-average risk project has a WACC of 8 percent, and an above-average risk project has a WACC of 12 percent. Which of the following independent projects should the company accept? Project A has average risk and an IRR = 9 percent. Project B has below-average risk and an IRR = 8.5 percent. Project C has above-average risk and an IRR = 11 percent. None of the above

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 19P
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A company estimates that an average-risk project has a WACC of 10 percent, a below-average risk project has a WACC of 8 percent, and an above-average risk project has a WACC of 12 percent. Which of the following independent projects should the company accept?

  1. Project A has average risk and an IRR = 9 percent.
  2. Project B has below-average risk and an IRR = 8.5 percent.
  3. Project C has above-average risk and an IRR = 11 percent.
  4. None of the above

 

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