LaPango Inc.estimates that its average-risk projects have a WACC of 10%,its below-average risk projects have a WACC of 8%,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,which is of below-average risk and has a return of 8.5%.
B) Project C,which is of above-average risk and has a return of 11%.
C) Project A,which is of average risk and has a return of 9%.
D) None of the projects should be accepted.
E) All of the projects should be accepted.

Question

Quizplus · Accepted Answer

Project B has a return greater than its risk-adjusted cost of capital,so it should be accepted.