Which one of the following statements is correct? A. Firms should accept low ris

Question

Which one of the following statements is correct?
A. Firms should accept low risk projects prior to funding high risk projects.
B. Making subjective adjustments to a firm's WACC when determining project discount rates unfairly punishes low-risk divisions within a firm.
C. A project that is unacceptable today might be acceptable tomorrow given a change in market returns.
D. The pure play method is most frequently used for projects involving the expansion of a firm's current operations.
E. Firms that elect to use the pure play method for determining a discount rate for a project cannot subjectively adjust the pure play rate.

Explanation / Answer

CORRECT ANSWER:

A project that is unacceptable today might be acceptable tomorrow given a change in market returns.

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