If a Firm Uses Its Weighted Average Cost of Capital

Multiple Choice

If a firm uses its weighted average cost of capital (WACC) to evaluate all capital budgeting projects, which of the following could occur?

A) Projects with little or no risk might be rejected when they actually should be accepted.
B) Projects with significant risks might be accepted when the actually should be rejected.
C) Projects with average risk will always be rejected when they actually should be rejected.
D) All of the above could occur.
E) None of the above could occur.