Duval IncUses Only Equity Capital,and It Has Two Equally-Sized Divisions

question 63

Multiple Choice

Duval Inc.uses only equity capital,and it has two equally-sized divisions.Division A's cost of capital is 10.0%,Division B's cost is 14.0%,and the corporate (composite) WACC is 12.0%.All of Division A's projects are equally risky,as are all of Division B's projects.However,the projects of Division A are less risky than those of Division B.Which of the following projects should the firm accept?

• A) A Division B project with a 13% return.
• B) A Division B project with a 12% return.
• C) A Division A project with an 11% return.
• D) A Division A project with a 9% return.
• E) A Division B project with an 11% return.

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Definitions:

Notarized

The act of officially certifying a legal document by a notary public, confirming the authenticity of signatures or documents.

Part Performance Exception

A legal doctrine that allows for the enforcement of an oral contract when one party has taken significant actions in reliance on the contract.

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Specific clauses within a contract for the purchase of land that stipulate the terms, conditions, and obligations of the parties involved.

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Enhancements or changes made to a property or piece of land that increase its value.