Using firm-wide wacc for all projects

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Reference no: EM131583263

1. In what way can a firm greatly reduce the problem associated with basing its decisions on inaccurate results from using firm-wide WACC for all projects?

A. Calculate WACCs using the separation principle.

B. Use proxy betas to calculate WACCs.

C. Calculate WACCs for each division separately.

D. Calculate WACCs firm-wide using the objective approach.

2. The common shares of Jones & Smith, Inc. sell for $22 per share. The firm is expected to set its next annual dividend at $0.68 per share, and all future dividends are expected to grow by 5 percent per year indefinitely. If Jones & Smith, Inc., experiences a flotation cost of 15 percent on new equity issues, what will be the flotation adjusted cost of equity?

A. 5.87 percent

B. 7.92 percent

C. 8.64 percent

D. 6.63 percent

Reference no: EM131583263

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