Bloom and Co

question 46

Multiple Choice

Bloom and Co. has no debt or preferred stockσit uses only equity capital, and has two equally-sized divisions. Division X's cost of capital is 10.0%, Division Y's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division X's projects are equally risky, as are all of Division Y's projects. However, the projects of Division X are less risky than those of Division Y. Which of the following projects should the firm accept?

• A) a division y project with a 12% return.
• B) a division x project with an 11% return.
• C) a division x project with a 9% return.
• D) a division y project with an 11% return.
• E) a division y project with a 13% return.

---

Definitions:

Locally Responsive

The ability of a business to adapt its products, services, and operations to meet the specific demands and preferences of local markets.

Globally Integrated

Refers to entities such as economies, businesses, or systems that are interconnected and interdependent across the world.

Location Economies

The cost advantages obtained by a business due to its geographical position or the location of its resources and operations.

Meganational Strategy

A business strategy that seeks to operate and compete across multiple countries and regions, often by adapting products and practices to local conditions while maintaining overarching global standards.