On-line Text Co. has four new text publishing products that it must decide on

publishing to expand its services. The firm's WACC has been 17%. The projects

are of equal risk, s of 1.6. The risk-free rate is 7% and the market rate is expected

to be 12%. The projects are expected to earn as follows:

i. Project W: 14%

ii. Project X: 18%

iii. Project Y: 17%

iv. Project Z: 15%

Required:

a. Justify which projects should be selected and give reason.

(10 marks)

b. Does current WACC rate of 17% is irrelevant or relevant? Justify your answer.

(5 marks)