A Firm Uses Its Weighted Average Cost of Capital to Evaluate

Multiple Choice

A firm uses its weighted average cost of capital to evaluate the proposed projects for all of its varying divisions.By doing so, the firm:

A) automatically gives preferential treatment in the allocation of funds to its riskiest division.
B) encourages the division managers to recommend only their most conservative projects.
C) maintains the current risk level and capital structure of the firm.
D) automatically maximizes the total value created for its shareholders.
E) allocates capital funds evenly among its divisions.