Answer to Question #6214 in Economics of Enterprise for LaMarcus Streeter
2. 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.
Answer is A. When selecting from several different projects with Internal rate of return (IRR), selected project is with a maximum value of IRR of the same class. Thus Project B is the only one that has a return of 8.5% that is greater than projects of the same risk class.
I have no more assignments.
Thank you for all the help! With 19 credit hours, their is always one class that hits the back burner, with your help i was able to get a B in this class and am going to Walk on graduation.
Thank you, Thank you, Thank you!