LaPango Inc

question 93

Multiple Choice

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

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Definitions:

LMX Model

Leadership Member Exchange Model; a theory suggesting that leaders develop different relationships with each of their subordinates, ranging from high-quality to low-quality exchanges.

Bounded Rationality Model

An approach suggesting that decision-making is limited by the information available, cognitive limitations of individuals, and the finite amount of time they have to make decisions.

Political Model

A framework in organizational studies that examines the use of power and influence by individuals and groups within an organization.

Radio-Frequency Identification (RFID)

A technology that uses electromagnetic fields to automatically identify and track tags attached to objects, containing electronically-stored information.