A firm has divisions in three different industries - mining, banking, and pharmaceuticals.It is considering three projects,
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A firm has divisions in three different industries - mining, banking, and pharmaceuticals.It is considering three projects, one in each industry.The following table shows the Internal Rate of Return of each project, along with the cost of capital for each industry (based on the typical betas of firms operating wholly within those industries). The firm's weighted average cost of capital is 5.1%.
Project Industry IRR Cost of Capital
A. Mining 10.2%. 10.7%
B Banking 9.3% 9.7%
C Pharmaceuticals14% 13.7%
Which projects should the firm accept? why?
Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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