Express Press Evaluates Many Different Capital Budgeting Projects Each Year

question 5

Multiple Choice

Express Press evaluates many different capital budgeting projects each year.The risks of the projects often differ significantly,from very little risk to risks that are substantially greater than the average risk associated with the firm.If Express Press always uses its weighted average cost of capital,or average required rate of return,to evaluate all of these capital budgeting projects,then the company might make an incorrect decision,or a mistake,by

• A) accepting projects that actually should be rejected.
• B) accepting projects with internal rates of return that are too high.
• C) rejecting projects that actually should be rejected.
• D) rejecting projects with internal rates of return that are lower than the appropriate risk-adjusted required rate of return.
• E) accepting project that actually should be accepted.

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Definitions:

Compound

A substance made up of two or more different elements that are chemically bonded together in a fixed ratio.

Common Name

The simplified, non-scientific name of a chemical substance or organism that is generally known and used.

Compound

A substance made up of two or more different elements chemically bonded together in a fixed ratio.

Mutually Exclusive

Two events that cannot happen at the same time in a given experiment or situation.