Question: Based on its target capital structure, VJM Inc. estimates a WACC of 6% for its average-risk projects, a WACC of 4% for i ts below-average

Based on its target capital structure, VJM Inc. estimates a WACC of 6% for its average-risk projects, a WACC of 4% for i ts below-average risk projects, and a WACC of 8% for its above-average risk projects. VJM Inc. is choosing between three independent projects. Which of the following projects (X, Y, Z) should the company accept?

a.Project Y, which is of above-average risk and has a IRR of 7.8%. b.None of the projects should be accepted. c.Project Z, which is of average risk and has a IRR of 7.8%. d.All of the projects should be accepted. e.Project X, which is of below-average risk and has a IRR of 2%.

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