Elkridge Construction Company has an overall (composite) cost of capital of 12 percent. This cost of capital reflects the cost of capital for an Elkridge Construction project with average risk. However, the firm takes on projects of various risk levels. The company experience suggests that low-risk projects have a cost of capital of 10 percent and high-risk projects have a cost of capital of 15 percent. Which of the following projects should the company select to maximize shareholder wealth?

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Project 1. Single-family homes 2. Multifamily residential 3. Commercial 4. Single-family homes 5. Commercial Expected Return 13% 12 18 9 13 Risk Low Average High Low High