Finance Open Query

The MacMillen Company has equal amounts of low-risk, average-risk, and high-risk projects.  The firm’s overall WACC is 12%.  The CFO believes that this is the correct WACC for the company’s average-risk projects, but that a lower rate should be used for lower-risk projects and a higher rate for higher-risk projects.  The CEO disagrees, on the grounds that even though projects have different risks, the WACC used to evaluate each project should be the same because the company obtains capital for all projects from the same sources.  If the CEO’s position is accepted, what is likely to happen over time?

Don't use plagiarized sources. Get Your Custom Essay on
Need an answer from similar question? You have just landed to the most confidential, trustful essay writing service to order the paper from.
Just from $11/Page
Order Now