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:

Hypnosis

A trance-like state of focused attention, reduced peripheral awareness, and an enhanced capacity for response to suggestion.

Hypnotized

A state of highly focused attention or concentration, often associated with relaxation and heightened suggestibility.

Accuracy

In the context of information and measurement, accuracy refers to the closeness of a given measurement or value to its true value.

Dissociation

A split in consciousness in which one part of the mind operates independently of others.