Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of

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: Project Risk Expected Return A High 15% B Average 12% C High 11% D Low 9% E Low 6% Which set of projects would maximize shareholder wealth? a. A and B. b. A, B, and C. c. A, B, and D. d. A, B, C, and D. e. A, B, C, D, and E.

Explanation / Answer

c. A, B, and D

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