Question
Weston Industries is considering the following independent projects for the coming year: Project Required Investment Expected Rate of Return Risk X $4 million 15.0% High
Weston Industries is considering the following independent projects for the coming year:
| Project | Required Investment | Expected Rate of Return | Risk |
| X | $4 million | 15.0% | High |
| Y | 4 million | 11.0% | Average |
| Z | 2 million | 11.5% | Low |
Westons WACC is 12 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects. Which project(s) should Weston accept assuming it faces no capital constraints?
| a. | Projects Y and Z | |
| b. | Project Y only | |
| c. | Projects X and Z | |
| d. | Project Z only | |
| e. | Project X only |
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Financial Management For Farmers And Rural Managers
Authors: Martyn Warren
4th Edition
0632048719, 9780632048717
