Question
Based on its target capital structure, Tiger Inc. estimates a WACC of 12% for its average-risk projects, a WACC of 10% for i ts below-average
Based on its target capital structure, Tiger Inc. estimates a WACC of 12% for its average-risk projects, a WACC of 10% for i ts below-average risk projects, and a WACC of 14% for its above-average risk projects. Tiger Inc. is choosing between three independent projects. Which of the following projects (A, B, and C) should the company accept?
a. All of the projects should be accepted. b. Project C, which is of below-average risk and has a return of 9%. c. None of the projects should be accepted. d. Project A, which is of above-average risk and has a return of 13%. e. Project B, which is of average risk and has a return of 11%.
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