Uses only equity capital-two equally-sized divisions

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Reference no: EM13828976

Duval 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 corporate (composite) WACC is 12.0%. All of Division A's projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept?

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

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

c. A Division A project with an 11% return.

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

why?

Reference no: EM13828976

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