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

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Definitions:

Total Profit

The total amount of money a company earns after subtracting the costs associated with producing and selling its products or services.

Early Finish Time

The earliest possible point in time when a particular task, project, or activity can be completed.

Latest Finish Time

In project management, the latest possible point in time by which an activity must be completed without delaying the project.