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FIN - Delta Industries has an overall (composite) Weighted Average Cost of Capital

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Question;Delta Industries has an overall (composite) Weighted Average Cost of Capital (WACC) of 10 percent. This cost of capital reflects the cost of capital for a Delta project with average risk, however, there are large differences among the projects. The company estimates that low-risk projects have a cost of capital of 8 percent and high-risk projects have a cost of capital of 12 percent. The company is considering the following projects:Project Expected Return Risk A 15% HighB 12 AverageC 11 HighD 9 LowE 6 LowWhich of the projects will the company select?

 

Paper#48325 | Written in 18-Jul-2015

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