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

question 30

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 7 percent.If the firm uses its current WACC of 12 percent to evaluate these projects,which project(s) ,if any,will be incorrectly accepted or rejected?

• A) Project A would be incorrectly rejected.
• B) Both Projects A and C would be incorrectly rejected.
• C) Project A will be incorrectly rejected and Project B would be incorrectly accepted.
• D) None of the projects will be incorrectly accepted or rejected.

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Definitions:

Internal-Stable

A characteristic or attribute that is considered innate and constant within an individual or situation.

Bad Teacher

A term typically used to describe an educator who is unsuccessful in engaging or educating their students effectively.

Self-Serving Bias

The tendency to attribute positive outcomes to internal factors and negative outcomes to external factors in oneself.

Ingroup

A social group to which a person psychologically identifies as being a member.