Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston 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: Expected Project Risk Return A High 15% B Average 12% C High 11% D Low 9% E Low 6% Which set of projects would maximize shareholder wealth? Group of answer choices 1. A, B, C, D, and E. 2. A, B, and C. 3. A, B, and D. 4. A and B. 5. A, B, C, and D.
Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston 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: Expected Project Risk Return A High 15% B Average 12% C High 11% D Low 9% E Low 6% Which set of projects would maximize shareholder wealth? Group of answer choices 1. A, B, C, D, and E. 2. A, B, and C. 3. A, B, and D. 4. A and B. 5. A, B, C, and D.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston 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:
|
Expected
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||
|
Project
|
Risk
|
Return
|
|
A
|
High
|
15%
|
|
B
|
Average
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12%
|
|
C
|
High
|
11%
|
|
D
|
Low
|
9%
|
|
E
|
Low
|
6%
|
Which set of projects would maximize shareholder wealth?
Group of answer choices
1. A, B, C, D, and E.
2. A, B, and C.
3. A, B, and D.
4. A and B.
5. A, B, C, and D.
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