Kurt, Who Is a Divisional Manager, Continually Brags That His

Multiple Choice

Kurt, who is a divisional manager, continually brags that his division's required return for its projects is one percent lower than the return required for any other division of the firm.Which one of the following most likely contributes the most to the lower rate requirement for Kurt's division?

A) Kurt tends to overestimate the projected cash inflows on his projects.
B) Kurt tends to underestimate the variable costs of his projects.
C) Kurt has the most efficiently managed division.
D) Kurt's division is less risky than the other divisions.
E) Kurt's projects are generally financed with debt while the other divisions' projects are financed with equity.