10. Duval Inc. uses only equity capital, and it has two equally-sized divisions.

Question

10.

Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A's projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept?

a. A Division B project with a 12% return. b. A Division B project with a 13% return. c. A Division A project with a 9% return. d. A Division B project with an 11% return. e. A Division A project with an 11% return

Explanation / Answer

correct option is ""B" -A division B project with a 13% return

reason .Return on project(IRR) is more than cost of capital(WACC)

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