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Author Question: McCue Company has equal amounts of low-risk, average-risk, and high-risk projects. McCue estimates ... (Read 91 times)

poopoo

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on: Aug 7, 2023
McCue Company has equal amounts of low-risk, average-risk, and high-risk projects. McCue estimates that its overall WACC is 13%. The CFO believes that this is the correct WACC for the company’s average-risk projects, but that a lower rate should be used for lower-risk projects and a higher rate for higher-risk projects. The CEO disagrees on the grounds that, even though projects have different risks, the WACC used to evaluate each project should be the same because the company obtains capital for all projects from the same sources. If the CEO’s position is accepted, what is likely to happen over time?

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The company will take on too many high-risk projects and reject too many low-risk projects.


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The CFO’s recommendation will maximize the firm’s intrinsic value.


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The firm’s overall risk should decrease over time.


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The company’s overall WACC should decrease over time because its stock price should be increasing.

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by poopoo on Aug 7, 2023

my33251

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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poopoo

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Reply 2 on: Aug 7, 2023
Great answer, keep it coming :)

okolip

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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