44. XYZ Inc. has an overall (composite) WACC of 10%, which reflects the cost of

Question

44. XYZ Inc. has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk. XYZ evaluates low-risk projects with a WACC of 8%, average 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, B, and C
B) A, B, and D
C) A, B, C, and D
D) A, B, C, D, and E

Explanation / Answer

C) A, B, C, and D

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