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The MacMillen Company Has Equal Amounts of Low-Risk,average-Risk,and High-Risk Projects

question 37

Multiple Choice

The MacMillen Company has equal amounts of low-risk,average-risk,and high-risk projects.The firm's overall WACC is 12%.The CFO believes that this is the correct WACC for the company's average-risk projects,but that a lower rate should be used for lower-risk projects and a higher rate for higher-risk projects.The CEO disagrees,on the grounds that even though projects have different risks,the WACC used to evaluate each project should be the same because the company obtains capital for all projects from the same sources.If the CEO's position is accepted,what is likely to happen over time?

Compare the progressivity of tax systems between the U.S. and other OECD countries.

Understand the major expenditures and sources of tax revenue for state governments.

Understand the concept of scarcity and its implications for production, consumption, and economic choices.

Differentiate between positive and normative statements in economics.

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