Suppose Tapley Corporation Uses a WACC of 8% for Below-Average

question 32

Multiple Choice

Suppose Tapley Corporation uses a WACC of 8% for below-average risk projects,10% for average risk projects,and 12% for above-average risk projects.Which independent project should Tapley accept,assuming that the company uses the NPV method when choosing projects?

• A)Project A, which has average risk and an IRR of 9%
• B)Project B, which has below-average risk and an IRR of 8.5%
• C)Project C, which has above-average risk and an IRR of 11%
• D)Without information about the projects' NPVs we cannot determine which one(s) should be accepted

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Definitions:

Board of Governors

An executive committee or oversight body responsible for setting policies and managing the affairs of an organization, such as a central bank or educational institution.

Bank Acts

Bank Acts are laws and regulations that govern the operations, establishment, and oversight of banks, aiming to ensure their stability and integrity.

Discount Rate

The interest rate the Fed charges banks that borrow reserves

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Financial organizations, such as banks and credit unions, that accept deposits from individuals and provide loans and other financial services.