Puckett Inc

question 24

Multiple Choice

Puckett Inc.risk-adjusts its WACC to account for project risk.It uses a WACC of 8% for below-average risk projects,10% for average-risk projects,and 12% for above-average risk projects.Which of the following independent projects should Puckett accept,assuming that the company uses the NPV method when choosing projects?

• A) Project B, which has below-average risk and an IRR = 8.5%.
• B) Project C, which has above-average risk and an IRR = 11%.
• C) Without information about the projects' NPVs we cannot determine which project(s) should be accepted.
• D) All of these projects should be accepted.
• E) Project A, which has average risk and an IRR = 9%.

Understand the concept and calculation of marginal probability.

Comprehend the definition and calculation of joint (intersection) and union probabilities.

Differentiate between independent and dependent events.

Calculate conditional probabilities and understand their implications.

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Definitions:

Corporate Bonds

Debt securities issued by corporations to raise capital, promising to repay the principal along with interest.

Retirement Program

A financial plan or fund that provides individuals with income or benefits upon retirement, often including savings, investment plans, or government pensions.

Diverse Set

A collection consisting of various distinct elements or individuals.

Rate Of Return

The percentage gain or loss on an investment relative to the amount of money invested.