Lawler's Is Considering a New Project

question 28

Multiple Choice

Lawler's is considering a new project.The company has a debt-equity ratio of 0.72.The company's cost of equity is 15.1 percent,and the aftertax cost of debt is 7.2 percent.The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +3 percent.What is the WACC it should use for the project?

• A)12.53 percent
• B)12.98 percent
• C)14.79 percent
• D)15.14 percent
• E)15.68 percent

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Definitions:

Strong Organizational Culture

An organization where the core values are intensely held and widely shared among all members, leading to high commitment and consistency in behavior.

Dominant Values

The core beliefs and principles that are widely shared and deeply held within a society or organization.

Strong Organizational Culture

A scenario where an organization's values, beliefs, and behaviors are deeply embedded, guiding member's actions and creating a distinct identity.

Conflict Among Employees

Disagreements or disputes between workers within an organization, which can stem from differences in opinions, interests, or personalities.