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Superinc. uses a risk-adjustment when evaluating projects of different risk. Its overall (composite) WACC is 9%, which reflects the cost of capital for its average
Superinc. uses a risk-adjustment when evaluating projects of different risk. Its overall (composite) WACC is 9%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Superinc. evaluates low-risk projects with a risk-adjusted project cost of capital of 7%, average-risk projects at 9%, and high-risk projects at 11%. Should the following project be adopted if risk is low, average, or high? Time 0 1 $1,000 $125 Adopt only if risk is low 2 $200 3 $250 CF $325 $400 Adopt if risk is low or average Adopt at any of these risk levels Do not adopt under any of these risk levels
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