Langston Labs Has an Overall (Composite) WACC of 10%,which Reflects

question 76

Multiple Choice

Langston Labs has an overall (composite) WACC of 10%,which reflects the cost of capital for its average asset.Its assets vary widely in risk,and Langston evaluates low-risk projects with a WACC of 8%,average projects at 10%,and high-risk projects at 12%.The company is considering the following projects:Which set of projects would maximize shareholder wealth? $\begin{array}{l}\begin{array}{ccc}\underline { \text { Project } } &&\underline { \text {Risk }} \\\text { A } & & \text { High } \\n & & \text { Average } \\\text { C } & & \text { High } \\\text { D } & & \text { Low } \\\text { E } & & \text { Low }\end{array}\begin{array}{c}\underline { \text {Expected Return} } \\15 \% \\12 \\11 \\9 \\6\end{array}\end{array}$

• A)A, B, and C
• B)A, B, and D
• C)A, B, C, and D
• D)A, B, C, D, and E

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Definitions:

Drawer

In the context of banking and finance, a drawer is the person who writes or issues a check, directing a bank to pay the stated amount from the drawer's account.

Payee

The individual or entity to whom money is payable or is meant to be paid, typically named in financial documents like checks or promissory notes.

Certification

Of a cheque, an understanding by a bank to pay the amount of a cheque on presentation.

Endorsement

The act of signing one's name on the back of a check or other negotiable instrument or the addition of a provision to an insurance policy, altering its coverage.