Answer on Economics of Enterprise Question for Sarah
. 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?
Level of risk can show profitability of project. If company accept above-average risk project it can benefit more than accepting below-average risk project. It is more common to accept below-average risk project