Use the following question to guide your analysis.

1. Does this make sense as a way to do capital budgeting? (i.e. this question asks you to evaluate your proposed new methodology)

Note:
1.The case did a good job guiding you to understand WACC, please make sure you read the case thoroughly before you try to make an analysis of the above question.

2. If you were to evaluate the capital budgeting method used historically by AES, you needed an appropriate required rate of return for AES to use around the world. In other words, this question leads you to understand the WACC ;

3. You may want to keep in mind the capital asset pricing model (CAPM) to understand the cost of equity.