Your company asked you to analyze decisions on projects to invest in You have projects A, B, C, and D The IRR for each project has been plotted on a graph showing the Risk (B) and the Return (R)

Finance Dec 26, 2020

Your company asked you to analyze decisions on projects to invest in You have projects A, B, C, and D The IRR for each project has been plotted on a graph showing the Risk (B) and the Return (R). You also have plotted the SML and WACC model lines on your graph to assist your decision RE SML D. C. WACC Using the Security Market Line (SML) decision criteria, which project(s) would have been incorrectly rejected if you had used the WACC to make decisions?
Swed Help Save & Exit ? B Band A and B
Save Help Save & Exit Submit A A and 8 D CondD

Expert Solution

If we had used the SML criteria, we would have rejected B and D. And in the WACC criteria, out of B and D, we would have rejected D as it is above the WACC line. Hence, D would have been wrongly rejected. D is the answer

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