A Company Estimates That Its Weighted Average Cost of Capital

question 50

Multiple Choice

A company estimates that its weighted average cost of capital (WACC) is 10 percent. Which of the following independent projects should the company accept?

• A) Project A requires an up-front expenditure of $1,000,000 and generates a net present value of $3,200.
• B) Project B has a modified internal rate of return of 9.5 percent.
• C) Project C requires an up-front expenditure of $1,000,000 and generates a positive internal rate of return of 9.7 percent.
• D) Project D has an internal rate of return of 9.5 percent.
• E) None of the projects above should be accepted.

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Definitions:

Syllogism

A form of deductive reasoning that consists of three propositions: a major premise, a minor premise, and a conclusion.

Minor Term

In a categorical syllogism, the term that occurs in the subject of the conclusion.

Syllogism

A form of reasoning in which a conclusion is drawn from two given or assumed propositions (premises); a common logical structure.

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