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Question
Plimoth Plantation's overall WACC is 11%. It has an opportunity to accept a project that involves nearly riskless cash flows, but will earn only 7%. This project will require a significant portion of the firm's capital. If Plimoth accepts this project,A) the value of the company will fall because it's WACC will fall.
B) the value of the company will fall because it's average rate of return on investments will fall.
C) the value of the company will rise because its WACC will fall.
D) both it's average rate of return and its WACC should fall.
Answer
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