Thornton Homes has multiple divisions which operate as separate lines of business and face risks unique to those lines. The firm uses its overall WACC as the discount rate to evaluate all proposed projects. Accordingly, each division within the firm will tend to:

Multiple Choice

• receive less project funding if its line of business is riskier than that of the other divisions.

• prefer higher risk projects over lower risk projects.

• become less risky over time based on the projects that are accepted.

• avoid risky projects so it can receive more project funding.

• have an equal probability with all the other divisions of receiving funding.