Langston Labs Has an Overall (Composite) WACC of 10%, Which

question 15

Multiple Choice

Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston evaluates low-risk projects with a WACC of 8%, average-risk projects at 10%, and high-risk projects at 12%. The company is considering the following projects:Which set of projects would maximize shareholder wealth?

• A) A and B.
• B) A, B, and C.
• C) A, B, and D.
• D) A, B, C, and D.
• E) A, B, C, D, and E.

---

Definitions:

Par Common Stock

The nominal or face value of common stock as stated in the corporate charter.

Fair Market Price

The price at which an asset would trade in a competitive auction setting, reflecting the true value under current market conditions.

Par Preferred Stock

Preferred stock issued at its nominal or face value, often with specified dividends, which has priority over common stock in dividend payments and upon liquidation.

Par Common Stock

The nominal or face value assigned to common stock shares by the issuing company, often used as an accounting standard.