Langston Labs Has an Overall (Composite)WACC of 10%,which Reflects the Cost

question 18

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: $\begin{array}{ccc}\text { Project } & \text { Risk } & \text { Expected Return } \\\text { A } & \text { High } & 15 \% \\\text { B } & \text { Average } & 12 \% \\\text { C } & \text { High } & 11 \% \\\text { D } & \text { Low } & 9 \% \\\text { E } & \text { Low } & 6 \%\end{array}$
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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.

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Definitions:

Distortion

The act of misrepresenting or altering information or reality, often to deceive or create a misleading impression.

Meta-Communication

The act of communicating about communication, often used to clarify or interpret the underlying message in an interaction.

Media Richness

A theory that evaluates communication media based on their ability to reproduce the information sent over them without loss or distortion.

Feedback

Information given to an individual or group about their performance or behavior, intended to guide future improvements.