Taylor Inc

question 84

Multiple Choice

Taylor Inc.estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%.Which of the following projects (A, B, and C) should the company accept?

• A) Project C, which is of above-average risk and has a return of 11%.
• B) Project A, which is of average risk and has a return of 9%.
• C) None of the projects should be accepted.
• D) All of the projects should be accepted.
• E) Project B, which is of below-average risk and has a return of 8.5%.

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Definitions:

Fairness

The equity or impartiality in treatment, judgments, and allocation of resources among individuals or groups.

Maximization

Maximization involves choosing the best feasible option, given a set of constraints, to achieve the highest possible level of an objective, such as profit, satisfaction, or efficiency.

Decision-Making

The process of making choices by identifying a decision, gathering information, and assessing alternative resolutions.

Vivid Observations

Highly detailed and clear observations, typically used to convey intricate details in a way that is easy to visualize and understand.