Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of
ID: 2623470 • Letter: L
Question
Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston evaluates low-risk projects with a WACC of 8%, average-risk projects at 10%, and high-risk projects at 12%. The company is considering the following projects:
Expected
Project
Risk
Return
A
High
15%
B
Average
12%
C
High
11%
D
Low
9%
E
Low
6%
Which set of projects would maximize shareholder wealth?
Expected
Project
Risk
Return
A
High
15%
B
Average
12%
C
High
11%
D
Low
9%
E
Low
6%
Explanation / Answer
A, B, C, and D.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.