FIN - Delta Industries has an overall (composite) Weighted Average Cost of Capital
Question # 00031745
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Updated on: 11/13/2014 11:33 PM Due on: 11/14/2014
Delta Industries has an overall (composite) Weighted Average Cost of Capital (WACC) of 10 percent. This cost of capital reflects the cost of capital for a Delta project with average risk; however, there are large differences among the projects. The company estimates that low-risk projects have a cost of capital of 8 percent and high-risk projects have a cost of capital of 12 percent. The company is considering the following projects:
Project Expected Return Risk
A 15% High
B 12 Average
C 11 High
D 9 Low
E 6 Low
Which of the projects will the company select?
Project Expected Return Risk
A 15% High
B 12 Average
C 11 High
D 9 Low
E 6 Low
Which of the projects will the company select?
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Rating:
/5
Solution: FIN - Delta Industries has an overall (composite) Weighted Average Cost of Capital