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:

David Hume

A Scottish Enlightenment philosopher, historian, economist, and essayist known especially for his philosophical empiricism and skepticism.

Philosophical Investigations

A work by Ludwig Wittgenstein that examines the nature of language, thought, and meaning through ordinary language philosophy.

Michel Foucault

A French philosopher and historian known for his critical studies of social institutions, including the human sciences, prisons, and the history of sexuality.

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