You are an analyst for a moderately sized conglomerate company. Your division's boss has put you in charge of performing all of the proposed project valuations and has instructed you that every project ought to be valued using the company's weighted average cost of capital with zero adjustments. Is your boss's idea about valuation correct?

Select one:

a. Valuing the projects by the firm's WACC is the proper thing to do. Adjusting the rate introduces inaccuracies into the value of projects.

b. We ought to adjust the cost of capital. The longer the life of the project, the greater our compensation ought to be per year.

c. All projects should not be discounted by the same rate. Discounting all projects by the same discount rate suggests that all projects have the same level of risk. An assumption of identical risk is an invalid assumption.

d. Using weighted average cost of capital as a tool for project valuation is invalid. WACC should only be used as a means of discounting the firms cash flows to determine the accurate stock price of the firm.

e. None of the above answers provide a valid explanation regarding project valuation using WACC.