The Tierney Group Has Two Divisions of Equal Size: an Office

question 49

Multiple Choice

The Tierney Group has two divisions of equal size: an office furniture manufacturing division and a data processing division.Its CFO believes that stand-alone data processor companies typically have a WACC of 9%, while stand-alone furniture manufacturers typically have a 13% WACC.She also believes that the data processing and manufacturing divisions have the same risk as their typical peers.Consequently, she estimates that the composite, or corporate, WACC is 11%.A consultant has suggested using a 9% hurdle rate for the data processing division and a 13% hurdle rate for the manufacturing division.However, the CFO disagrees, and she has assigned an 11% WACC to all projects in both divisions.Which of the following statements is CORRECT?

• A) The decision not to adjust for risk means, in effect, that it is favoring the data processing division.Therefore, that division is likely to become a larger part of the consolidated company over time.
• B) The decision not to adjust for risk means that the company will accept too many projects in the manufacturing division and too few in the data processing division.This will lead to a reduction in the firm's intrinsic value over time.
• C) The decision not to risk-adjust means that the company will accept too many projects in the data processing business and too few projects in the manufacturing business.This will lead to a reduction in its intrinsic value over time.
• D) The decision not to risk-adjust means that the company will accept too many projects in the manufacturing business and too few projects in the data processing business.This may affect the firm's capital structure but it will not affect its intrinsic value.
• E) While the decision to use just one WACC will result in its accepting more projects in the manufacturing division and fewer projects in its data processing division than if it followed the consultant's recommendation, this should not affect the firm's intrinsic value.

Understand key events and periods that defined colonial expansion in England during the seventeenth century.

Identify and explain the impact of British colonial rule on social structures, including the African-American and Native American populations.

Recognize the diplomatic strategies and outcomes of Native American tribes in response to European colonization.

Analyze the effects of New England settlers in the transformation of New York and other colonies.

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Definitions:

Bradycardia

A heart rate that is slower than usual, usually characterized by less than 60 beats per minute in adults.

Perianal Skin

The skin surrounding the anal opening, sensitive to various conditions and essential to maintain for overall hygiene and health.

Circulatory Overload

A condition characterized by an excessive volume of circulating blood in the body, often due to transfusion or fluid administration, leading to symptoms such as high blood pressure, swelling, and shortness of breath.

Hypertonic Solution

A solution with a higher concentration of solutes compared to the fluid inside a cell, leading to water moving out of the cell.