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18 Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in
18
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:
Project | Risk | Expected Return |
---|---|---|
A | High | 15% |
B | Average | 12% |
C | High | 11% |
D | Low | 9% |
E | Low | 6% |
Which set of projects would maximize shareholder wealth?
Select one:
a. A, B, and C.
b. A, B, C, D, and E.
c. A and B.
d. A, B, and D.
e. A, B, C, and D.
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