Laramie Labs uses a risk-adjustment when evaluating projects of different risk.Its overall (composite)WACC is 10%,which reflects the cost of capital for its average asset.Its assets vary widely in risk,and Laramie evaluates low-risk projects with a WACC of 8%,average-risk projects at 10%,and high-risk projects at 12%.The company is considering the following projects:
Which set of projects would maximize shareholder wealth?
A) A and B.
B) A, B, and C.
C) A, B, and D.
D) A, B, C, and D.
E) A, B, C, D, and E.

Question

Laramie Labs uses a risk-adjustment when evaluating projects of different risk.Its overall (composite)WACC is 10%,which reflects the cost of capital for its average asset.Its assets vary widely in risk,and Laramie evaluates low-risk projects with a WACC of 8%,average-risk projects at 10%,and high-risk projects at 12%.The company is considering the following projects: 
Which set of projects would maximize shareholder wealth?
A) A and B. 
B) A, B, and C. 
C) A, B, and D. 
D) A, B, C, and D. 
E) A, B, C, D, and E.

Quizplus · Accepted Answer

Statement b is true; the others are false.The following table shows the required return for each project on the basis of its risk level. 11ea42d0_c092_8580_9abf_05a1900b17dd_TB2090_00

Laramie Labs Uses a Risk-Adjustment When Evaluating Projects of Different