Each of the following factors affects the weighted average cost of capital (WACC

Question

Each of the following factors affects the weighted average cost of capital (WACC) equation. Which are factors that a firm cannot control? Check all that apply The firm's capital struc ure The firm's dividend payout ratio Interest rates in the economy The firm's capital budgeting decision rules The impact of a firm's cost of capital on managerial decisions Consider the following case: Lancashire Railway Company has two divisions, Land H. Division L is the company's low-risk division and would have a weighted average cost of capital of 12% if it was operated as an independent company. Division H is the company's high-risk division and would have a weighted average cost of capital of 18% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 15%. Division L is considering a project with an expected return of 13.5%. Should Lancashire Railway Company accept or reject the project? Accept the project Reject the project On what grounds do you base your accept-reject decisioni? Division L's project should be accepted, since its return is greater than the risk-based cost of capital for the division. O Division L's project should be accepted, because its return is less than the risk-based cost of capital for the division O Type here to search Address

Explanation / Answer

Option C , firm can't control the interest rate in economy.

Ans to next part , Yes accept the project

Part b , option A, because return is more than risk

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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