Question
Smith and Co. has no debt or preferred stock, it uses only equity capital, and has two equally sized divisions. Division X's cost of capital
Smith and Co. has no debt or preferred stock, it uses only equity capital, and has two equally sized divisions. Division X's cost of capital is 10.0%, Division Y's cost is 16.0%, and the corporate (composite) WACC is 13%. All of Division X's projects are equally risky, as are all of Division Y's projects. However, the projects of Division X are less risky than those of Division Y. Which of the following projects should the firm accept?
A Division X project with a 9.00% return.
A Division Y project with a 12.50% return
A Division X project with an 11.50% return
A Division Y project with an 15.00% return.
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The Misbehavior Of Markets A Fractal View Of Financial Turbulence
Authors: Benoit Mandelbrot, Richard L Hudson
1st Edition
0465043577, 978-0465043576
