With respect to capital project analysis, which of the following statements is accurate?

Multiple Choice

Mandatory projects should only be accepted if they produce a positive NPV when the overall company WACC is used as the discount rate.

Companies will correctly accept or reject every project if they adopt the subjective approach.

Overall, a company makes better decisions when it uses the subjective approach than when it uses its WACC as the discount rate for all projects.

The subjective approach assigns a discount rate to each project based on other companies in the same category as the project.

The pure play approach should only be used with low-risk projects.

Brannan Manufacturing has a target debt-equity ratio of .45. Its cost of equity is 11 percent, and its cost of debt is 6 percent. If the tax rate is 25 percent, what is the companys WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC

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