Suppose Tapley Inc

question 60

Multiple Choice

Suppose Tapley Inc. uses a WACC 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 Tapley accept, assuming that the company uses the NPV method when choosing projects?

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

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Definitions:

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Foreseeable Plaintiff

A person who is readily identifiable as likely to be harmed by the defendant's conduct, thus owed a duty of care in negligence law.

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