A firm has multiple divisions of similar nature, but with varying degrees of ris

Question

A firm has multiple divisions of similar nature, but with varying degrees of risk. Which one of the following would be the most appropriate, yet relatively casy, means of assigning discount rates to each division's proposed investments? 3. Assign each project a rate equal to the firm's cost of equity Assign each investment project a random rate that varies between the firm's cost of debt and it's cost of equity Assign every project a rate equal to the firm's WACC plus or minus a subjective adjustment for risk a. b. c. d. Assign each project a rate equal to the market rate of return at the time of the investment proposal

Explanation / Answer

Option C is the answer

For the firm has multiple divisions of similar nature, but with varying degrees of risk then for discounting rate assign every project a rate equal to the firm's WACC plus or minus a subjective adjustment for risk. Because WAACC consider the risk of the each project.

So the option C is answer.

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