A Firm Has Multiple Divisions of Similar Nature,yet Varying Degrees

question 6

Multiple Choice

A firm has multiple divisions of similar nature,yet varying degrees of risk.Which one of the following would be the most appropriate,yet relatively easy,means of assigning discount rates to each of its proposed investments?

• A)Assign every project a rate equal to the firm's cost of equity
• B)Assign every firm a random rate that varies between the firm's cost of debt and its cost of equity
• C)Assign every project a rate equal to the firm's WACC plus or minus a subjective adjustment
• D)Determine the best pure play rate for each project
• E)Assign every project a rate equal to the market rate of return at the time of the proposal

---

Definitions:

Foreign Subsidiary

A company that is owned or controlled by another company but is located in a different country.

International Operations

Business activities and transactions conducted across national borders, involving the management of international resources, markets, and logistics.

Asia Pacific Economic Forum

a regional inter-governmental forum aimed at facilitating economic growth, cooperation, trade, and investment in the Asia-Pacific region.

Trade Barriers

Measures implemented by countries to restrict or control the free exchange of goods and services across their borders, such as tariffs, quotas, and regulations.