If a firm has two divisions and one division is riskier than the other, what would be the potential result if the firm used its overall WACC to evaluate the projects in both divisions? 

Multiple choice question. 

The less risky division's projects will typically receive full funding and the riskier division's projects will often be incorrectly rejected. 

Both divisions will receive the incorrect amount of funding because all projects will be incorrectly accepted or rejected. 

Both divisions will receive the correct amount of funding because all projects will be correctly accepted or rejected. 

The riskier division's projects will typically receive full funding and the less risky division's projects will often be incorrectly rejected

Answer rating: 100% (QA)

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