An All-Equity Firm Is Considering the Projects Shown as Follows

question 26

Multiple Choice

An all-equity firm is considering the projects shown as follows.The T-bill rate is 4 percent and the market risk premium is 9 percent.If the firm uses its current WACC of 14 percent to evaluate these projects,which project(s) will be incorrectly rejected?

• A)Project A
• B)Project B
• C)Project C
• D)Project D

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Definitions:

Dominant Firms

Companies that have a major share of the market sales, influence, or both, enabling them to set prices within the industry.

Planned Economies

Economic systems where government agencies centrally plan and direct all major economic activities, assigning resources and determining outputs with the aim of achieving specific goals.

U.S. Firms

Companies or businesses that are registered, operate, or have their headquarters in the United States.

Bankrupt

A legal status of a person or entity that cannot repay debts to creditors and is thus subject to specific legal processes.