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Which are the correct answers in this Corporate Finance exercise about WACC? Serenity Beds is evaluating.. Serenity Beds is evaluating the following projects as possible
Which are the correct answers in this Corporate Finance exercise about WACC?
Serenity Beds is evaluating..
Serenity Beds is evaluating the following projects as possible investments: The column labeled "Project Risk" indicates whether the project's risk is average, high, or low compared to the average risk of Serenity's existing assets. Serenity has determined that its weighted average cost of capital (WACC) is 10%. All of the projects can be purchased if they all are considered acceptable If Serenity uses its WACC to evaluate the projects, which one(s) would be considered acceptable? Project CD only All of the projects are acceptable. Projects CD and XY None of the projects is acceptable. Project XY only Serenity's policy is to adjust its average required rate of return (WACC) when the risk associated with a project is determined to be either higher than average o lower than average. The adjustment for higher-than-average risk projects is 5%, and the adjustment for lower-than-average risk projects is 3%. Which project(s) should Serenity purchase? Projects XY and AB Project CD only None of the projects is acceptable. Projects AB and CD Projects XY and CDStep by Step Solution
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