Question
You are considering two mutually exclusive projects where you can choose only one. Project Alpha has a ROE of 25% and Project Beta has a
You are considering two mutually exclusive projects where you can choose only one.
Project Alpha has a ROE of 25% and Project Beta has a ROE of 32%.
The weighted average cost of capital is 27.5%.
Which one of the following statements is the most accurate?
| a. | Project Beta with its ROE of 32% is going to be preferred as it exceeds the cost of capital. | |
| b. | Project Alpha with its ROE of 25% is going to be preferred as it exceeds the cost of capital. | |
| c. | Project Beta with its ROE being greater than the ROE of Project Alpha will be preferred. | |
| d. | Due to the proximity of the ROEs, you would be indifferent between Project Alpha and Beta. |
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
