Kelly's Uses the Firm's WACC as the Required Return for Some

question 7

Multiple Choice

Kelly's uses the firm's WACC as the required return for some of its projects.For other projects, the firms uses a rate equal to WACC plus one percent, while another set of projects is assigned rates equal to WACC minus some amount.Which one of the following factors should be the key factor the firm uses to determine the amount of the adjustment it will make when assigning a discount rate to a specific project?

• A)The current market rate of interest
• B)Actual source of funds used to finance the project
• C)The perceived risk level of project
• D)The division within the firm that will be assigned to manage the project
• E)The firm's current debt-equity ratio

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