Puckett Inc

question 38

Multiple Choice

Puckett Inc.risk-adjusts its WACC to account for project risk.It uses a risk-adjusted project cost of capital of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects.Which of the following independent projects should Puckett accept, assuming that the company uses the NPV method when choosing projects?

• A) Project B, which has below-average risk and an IRR = 8.5%.
• B) Project C, which has above-average risk and an IRR = 11%.
• C) Without information about the projects' NPVs we cannot determine which project(s) should be accepted.
• D) All of these projects should be accepted.
• E) Project A, which has average risk and an IRR = 9%.

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Definitions:

Autonomy

The degree to which individuals or teams have the freedom, independence, and discretion in their work and decision-making.

Power Sharing

A governance practice where different groups or individuals share decision-making authority, typically aimed at ensuring fair representation and preventing monopolies of power.

Confidence

The feeling or belief that one can rely on someone or something; self-assurance.

Dynamic Environments

Refers to rapidly changing and evolving external conditions that businesses must adapt to in order to stay competitive and effective.