Takelmer Industries has a different WACC for each of three types of projects.Low-risk projects have a WACC of 8.00%,average-risk projects a WACC of 10.00%,and high-risk projects a WACC of 12%.Which of the following projects do you recommend the firm accept? $$\begin{array} { | c | c | c | }
\hline \text { Project } & \text { Level of Risk } & \text { IRR } \
\hline \text { A } & \text { Low } & 9.50 \% \
\hline \text { B } & \text { Average } & 8.50 \% \
\hline \text { C } & \text { Average } & 7.50 \% \
\hline \text { D } & \text { Low } & 9.50 \% \
\hline \text { E } & \text { High } & 14.50 \% \
\hline \text { F } & \text { High } & 17.50 \% \
\hline \text { G } & \text { Average } & 11.50 \% \
\hline
\end{array}$$
A)A,B,C,D,G
B)B,C,E,F,G
C)A,D,E,F,G
D)A,B,C,D,E,F,G

Question

Takelmer Industries has a different WACC for each of three types of projects.Low-risk projects have a WACC of 8.00%,average-risk projects a WACC of 10.00%,and high-risk projects a WACC of 12%.Which of the following projects do you recommend the firm accept? $$\begin{array} { | c | c | c | } 
\hline \text { Project } & \text { Level of Risk } & \text { IRR } \
\hline \text { A } & \text { Low } & 9.50 \% \
\hline \text { B } & \text { Average } & 8.50 \% \
\hline \text { C } & \text { Average } & 7.50 \% \
\hline \text { D } & \text { Low } & 9.50 \% \
\hline \text { E } & \text { High } & 14.50 \% \
\hline \text { F } & \text { High } & 17.50 \% \
\hline \text { G } & \text { Average } & 11.50 \% \
\hline
\end{array}$$
A)A,B,C,D,G
B)B,C,E,F,G
C)A,D,E,F,G
D)A,B,C,D,E,F,G

Quizplus · Accepted Answer

Projects are accepted if their IRR (Internal Rate of Return) exceeds the WACC (Weighted Average Cost of Capital) for their risk level. Projects A and D (Low risk, IRR=9.50%) exceed the low-risk WACC of 8.00%. Projects E (High risk, IRR=14.50%) and F (High risk, IRR=17.50%) exceed the high-risk WACC of 12.00%. Project G (Average risk, IRR=11.50%) exceeds the average-risk WACC of 10.00%. Projects B and C are below their respective WACC thresholds and are not recommended.

Takelmer Industries Has a Different WACC for Each of Three