PLEASE ANSWER ALL QUESTION

CH 10

Consider the following case: Wellington Industries has two divisions, L and H. Division L is the company's low-fisk division and would have a welghted average cost of capital of B% if it was operated as an independent company. Division H is the company's high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division L is considering a project with an expected retum of 9.5%. 5hould wellington Industries accept or reject the project? Reject the project Accept the project: On what grounds do vou base your accept-reject decision? 7. Factors that affect the cost of-capital equation Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm's control? check all that apply. Interest rates in the economy The performance of index funds, such as the S8P 500 The firm's capital budgeting decision rules