Question
Jackson Inc. uses only equity capital, and it has two equally sized divisions. Division As cost of capital is 10.0%, Division Bs cost is 14.0%,
Jackson Inc. uses only equity capital, and it has two equally sized divisions. Division As cost of capital is 10.0%, Division Bs cost is 14.0%, and the composite WACC is 12.0%. All of Division As projects have the same risk, as do all of Division Bs projects. However, the projects in Division A have less risk than those in Division B. Which of the following projects should Jackson accept?
Question 6 options:
| a Division A project with a 9% return | |
| a Division B project with a 13% return | |
| a Division B project with a 12% return | |
| a Division A project with an 11% return |
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