The impact of cost of capital on managerial decisions Consider the following case: Marston Manufacturing Company has two divisions, Land H. Division L is the company's low risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division the company's high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division His considering a project with an expected return of 12%. Should Marston Manufacturing Company acompt or reject the project? Reject the project Accept the project On what grounds do you base your accept-reject decision? Division H's project should be rejected since its return is less than the risk-based cost of capital for the division Division H's project should be accepted, as its return is greater than the risk-based cost of capital for the division