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Acme Manufacturing Corporation has two divisions, L and H . Division L is the company s low - risk division and would have a weighted

Acme Manufacturing Corporation has two divisions, L and H. Division L is the companys low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the companys high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should Acme Manufacturing Corporation accept or reject the project? On what grounds do you base your acceptreject decision?

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