Multiple Choice
Swizer Industries has two separate divisions.Division X has less risk so its projects are assigned a discount rate equal to the firm's WACC minus .75 percent.Division Y has more risk and its projects are assigned a rate equal to the firm's WACC plus 1 percent.The company has a debt-equity ratio of .48 and a tax rate of 34 percent.The cost of equity is 15.4 percent and the aftertax cost of debt is 5.4 percent.Presently, each division is considering a new project.Division Y's project provides a return of 12.9percent while Division X's project is expected to earn 11.5 percent.Which project(s) , if any, should the company accept?
A) Accept both X and Y
B) Accept X and reject Y
C) Reject X and accept Y
D) Reject both X and Y
E) The answer cannot be determined based on the information provided.
Correct Answer:
Verified
Correct Answer:
Verified
Q63: Regulation Insurance has a beta of 0.90,
Q64: Lester's is a globally diverse company with
Q65: Country Markets has an EBIT of $42,650,
Q66: Which statement is correct, all else held
Q67: The 8.4 percent preferred stock of Dynachili
Q69: Country Cook's cost of equity is 16.2
Q70: Bermuda Cruises issues only common stock and
Q71: The common stock of Serenity Homescapes has
Q72: Assume a firm has a beta of
Q73: Orchard Farms has a pretax cost of