Laramie Labs Uses a Risk-Adjustment When Evaluating Projects of Different

Laramie Labs uses a risk-adjustment when evaluating projects of different risk.Its overall (composite) WACC is 10%, which reflects the cost of capital for its average asset.Its assets vary widely in risk, and Laramie evaluates low-risk projects with a WACC of 8%, average-risk projects at 10%, and high-risk projects at 12%.The company is considering the following projects:

Which set of projects would maximize shareholder wealth?

A) A and B.
B) A, B, and C.
C) A, B, and D.
D) A, B, C, and D.
E) A, B, C, D, and E.

Correct Answer:

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