LaPango Inc

question 93

Multiple Choice

LaPango Inc.estimates that its average-risk projects have a WACC of 10%,its below-average risk projects have a WACC of 8%,and its above-average risk projects have a WACC of 12%.Which of the following projects (A,B,and C) should the company accept?

• A) Project B,which is of below-average risk and has a return of 8.5%.
• B) Project C,which is of above-average risk and has a return of 11%.
• C) Project A,which is of average risk and has a return of 9%.
• D) None of the projects should be accepted.
• E) All of the projects should be accepted.

Gain knowledge about the borrowing process for firms through bond issuance.

Understand the concept of risk and return in investment decisions.

Grasp the basics of national income accounting in a closed economy.

Distinguish between public and private savings, and their contribution to national saving.

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Definitions:

Acid Chloride

Organic compounds derived from carboxylic acids by replacing the hydroxyl group with a chlorine atom, making them highly reactive acylating agents.

Anhydride

A compound formed from another compound by the removal of a molecule of water; commonly associated with carboxylic acid anhydrides in organic chemistry.

Nitrile

Organic compounds that contain a cyano group (-C≡N) attached to an alkyl group, used in the manufacture of rubbers, resins, and pharmaceuticals.

Amide

Organic compounds characterized by a carbonyl group attached to a nitrogen atom, often found in proteins and other important biological molecules.