A firm with multiple divisions uses its WACC as the discount rate for all propos

Question

A firm with multiple divisions uses its WACC as the discount rate for all proposed projects. Each division is in a separate line of business and each presents risks unique to those lines. Given this, a division within the firm will tend to: receive less project funding if its line of business is riskier than that of the other divisions. avoid risky projects so it can receive more project funding. become less risky over time based on the projects that are accepted. have equal probability of receiving funding as compared to the other divisions. prefer higher risk projects over lower risk projects.

Explanation / Answer

The correct answer is option (E). A division with in the firm would tend to prefer higher risk projects over lower risk projects.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.