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Basu Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the composite WACC is 12.0%. All of Division A's projects have the same risk, and all Division B projects are also equally risky. However, the projects in Division A do not have the same risk as those in Division B. Which of the following projects should Basu accept?

a) A Division A project with an 11% return.

b) A Division B project with a 12% return.

c) A Division B project with a 13% return.

d) A Division A project with a 9% return.

e) A Division B project with an 11% return.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M991986

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